Good work, consumers of America! You’ve collectively reduced your outstanding debt by $21.5 billion during the month of July. We’re so proud. Except, oops, that’s not so great for the economy.
The report spotlights a consumer determined to sock away cash and pay down debt following the stock market and real estate crashes. Households have saved about 5% of their income in recent months, vs. less than 1% before the downturn.
Long-term, the trend “puts (consumers) in a healthier financial position” by trimming interest costs and encouraging investments for “future needs like college education and retirement,” says John Ryding, chief economist of RDQ Economics.
In the short run, though, “This does not bode well for a significant, sustained rebound in real consumer spending,” Steven Wood, chief economist for Insight Economics, said in a report.
In other words, what’s good for us as individuals is bad for financial institutions. And for the overall economy, which counts on Americans to spend, spend, spend.
But don’t let that stop you from being, you know, responsible and sensible with your finances.
Consumers cut outstanding credit by record $21.5 billion [USA Today] (Thanks, snarkysnake!)
(Photo: Arria Belli)