Consumer Spending Stalls, People Are Saving Their Money

When consumer spending stalls it’s bad for the economy — but on the other hand it seems that people are saving money and paying down debt.


The personal savings rate rose to 6.4 percent of after-tax income in June, the highest reading in nearly a year. The savings rate is now about three times the 2.1 percent average for all of 2007, before the recession began.

While income growth was flat in June, incomes did post solid gains in April and May. But households chose to save the extra money rather than spend it. Higher savings restrain spending in the near term. But the extra resources allow households to repair their tattered balance sheets.

“It is of some comfort that households now appear to have something of a cushion that can be used to pay down debt or support spending,” said Paul Dales, U.S. economist at Capital Economics.

Consumer spending stalls, threatens recovery [MSNBC]


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  1. farcedude2 says:

    I was saving, then my car needed $3400 in service. So much for no new college loans next semester.

    • milkcake says:

      you can buy okay used car for that money

      • farcedude2 says:

        Heck, I bought this one for $5000, but this was the $100,000 mile maintenance, coupled with finding a leaky head gasket. The good news is that this is the last major maintenance that it will need for the next 100,000 miles.

        • coren says:

          $100,000 mile maintenance sounds a little spendy

        • Marlin says:

          So you spent $3400 on a car that cost $5000…

          Yea and people whonder how some get in bad places.

          • Nigerian prince looking for business partner says:

            Yes, and no. Spending $3,400 on a $5,000 car can often result in a better vehicle than buying another used vehicle for $3,400. It’s picking the devil you know.

            If the car has 100,000 miles and the OP is catching up in required maintenance, as well as several repairs previously mentioned, it could all add up very fast…

            Head gasket repair
            Timing belt & water pump
            Transmission fluid & filter change
            Brake job
            Spark plugs

            These are all things that are typically at need of replacement at or around 100,000 miles. There are many cars that require a timing belt, water pump, and tensioners at between 60 – 100,000 miles and this can run in the $500 – $1,000+ range but is absolutely critical for the longevity of the vehicle.

            • farcedude2 says:

              (not to disparage the other commenters, but) Yay! someone who understands that cars cost money! And yeah, that’s pretty much what they did. And, I was able to buy the car with $5000 cash, and I’ll have the $3400 paid off by the end of this credit card cycle, so only minor interest will be paid on it. And, as you said, it’s a much better car now than I could have gotten at either time for either amount.

        • Loias supports harsher punishments against corporations says:

          If you believe your car will have no more maintenance for 100,000 miles, you are incredibly naive.

          Did the auto shop tell you that? Shame on them.

          Did you shop around for a better price on the services needed? Or have it checked by another, independent, shop to confirm these services are needed?

          • Loias supports harsher punishments against corporations says:

            And to clarify, I caught you said “major” maintenance. Maybe we have different definitions of major? I’d say anything costing over $200 as major.

          • farcedude2 says:

            By ‘major’ maintenence, I mean stuff I can’t do myself. And, looking at the service schedule, I guess you’re right. I’ll need someone else to do the drive belts in 60,000 miles, because I don’t have the tools for that. Everything else (brakes, fluids, spark plugs, rotate tires, oil, filters) I should be able to do myself.

            • Loias supports harsher punishments against corporations says:

              You can do your own brakes? Do you have an autoshop of your own?

              I guess my point is that things break, and you can’t really anticipate when it will happen or what it will be, just save for it. I can pretty much guarantee something not on the maintenance schedule will break in the next 100,000 miles.

              • farcedude2 says:

                Yes, I do my own brakes. It’s really not that hard. Pop the wheels off, unbolt the calipers, replace the pads, replace the rotors, undo steps 1 and 2. You just need a variety of wrenches to do it with, and a flat spot to do it on. You’ll save a lot of money, and be a lot more comfortable around your car. And when something else breaks on my car, I’ll see what it is, and if I can fix/replace it, I’ll do it myself. The nice thing about the maintenance that they just did is that they checked everything that I can’t get to (clutch, cylinders, etc.), and pronounced it all sound, so it will most likely be something that I can fix.

                • Loias supports harsher punishments against corporations says:

                  That’s a pretty important distinction – no one here will assume you know that much about cars, so the choice to pay $3400 on a $5000 changes a bit.

                  I’m curious what you’re doing that costs $3400 and apparently doesn’t include the cost of labor, since it sounds like you’re doing it yourself? Even with labor, that is a ton of money for “maintenance.”

                  • farcedude2 says:

                    The $3400 was for maintenance done by a shop – basically, the head gasket (which keeps the cylinder gases/exhaust separate from the coolant) was blown, which is a known problem on this model, which I fully expected to have to pay someone to replace someday. That’s about $2000 dollars of it. The rest is all the maintenance that they could do on the way in and out, including the 100,000 mile maintenance. Basically, the invoice runs 4 pages, of stuff that really needed doing. And they pretty much did it all. And they only charged labor on the head gasket – everything else was parts only, since they were going to be in there anyway.

                    • Nigerian prince looking for business partner says:

                      That sounds about right. A head gasket job probably runs around $1,200 plus it’ll just open up a whole can of worms — I imagine another $400 for a radiator, $300 for a water pump, $300 for a timing belt, and a hodgepodge of other parts (hoses, thermostat, etc.). Plus, all the other stuff that should be done at around 100,000 miles.

                      (sorry if my numbers are a bit off, I haven’t worked in a shop for years)

              • Nigerian prince looking for business partner says:

                Actually, brakes aren’t terribly difficult.

      • Nigerian prince looking for business partner says:

        Spending $3,400 to repair a car with a known history can a better option than buying a used car with unknown maintenance history. You really can’t get much for that much money — way too many reliable used cars got bought up for cash-for-clunkers.

    • Loias supports harsher punishments against corporations says:

      I’m with the crowd here – spending $3400 on a $5000 is not the right way to spend your money.

      Buy a new (used) car and use the $3400 as a down payment on the new loan. You will thank yourself later, I promise.

      • farcedude2 says:

        And you all think I didn’t think about that? I knew going into the $5000 car deal that it was most likely going to need this sort of maintenance. Did I think it was going to be next summer, and not this one? Yes. My bad.
        I bought a car with a known problem (for a reduced price), and a very good brand record (subaru, btw), rather than spend more at the time. Now, it really should run (with the minor, performed by me maintenace) for many years without seeing the inside of a shop.

        • Nigerian prince looking for business partner says:

          I’m a big fan of Subarus but leaky head gaskets have been a major problem in many of their models. There have been several class action lawsuits, as well as a whole slew of silent recalls.

          • farcedude2 says:

            Yeah, none of which mine have been included in. At least they’ve (apparently) got it fixed in the last couple years, and the repair is a permanent one.

    • smo0 says:

      Alright so… not to gripe on anyone here… more of a question…

      I spend the first 20 years of my life watching everyone in my family go through used car after used car, buying these POS’s that break down and cost THOUSANDS to fix.

      They always encouraged me to get a used car – having see the horrors my mother went through and the rest of my family, I vowed NEVER to buy a used car.

      The only one who didn’t was my aunt – has the best history with cars ever (but then again she always owned hondas) she told me – “NEVER buy a car without a warranty.”

      I’ve stuck by this.. only used car I ever bought was a certified pre-owned that comes with a warranty…

      So… what’s best…. saving 3500, buying some old thing… or putting that 3500 down on a car that costs around 20k… (loan will probably be 25k) ?

      I get equally amounts of distaste from both sides… but before I decide to get back into the “car business” I really wanna know what’s the honest god’s truth…

      so far, a valid, lingering argument comes from a guy I’m seeing – he was a mechanic and he works in an auto parts store AND he drives a race car – he said he’d never buy a new car because he can fix most everything on a used car and he has hookups around town for stuff he can’t…

      Is this the only exception to the rule?

      • Loias supports harsher punishments against corporations says:

        Sounds like your family didn’t shop smart with used cars. There is no doubt that used cars will run into maintenance you have to pay for sooner than cars – but that’s really only because new cars have warranties. Look at a maintenance schedule on a car – you’ve got significant maintenance every 30k miles, more so on bigger milestones like 60k and 90k. This doesn’t change based on the age; this maintenance is required whether it’s new or not.

        It’s documented cars lose around half their value within a year of purchase (depending on make/model). So, buy a new car worth 24k or a year-old one for 12-14k? I think the answer is pretty obvious.

        Bottomline, you might spend more on maintenance on a used car, but you more than make up for it by spending less on the car. Some suggestions on what you should do when buying a used car:

        – Research year/makes/model for those with good reliability history and resale value. Resale, while also ensuring you get more for it when you in turn sell it, generally means they are desireable for their longevity. is a good place to research, as well as other places.

        – Have any used car inspected before purchase. A mechanic can give you a very good idea of what items are in disrepair or will need replacement soon. Also find the maintenance schedule for the car so you know what’s coming up or might have been missed by the previous owner.

        • smo0 says:

          “So, buy a new car worth 24k or a year-old one for 12-14k? I think the answer is pretty obvious.”

          That’s why I included with certified pre-owned… that’ I’m okay with but it’s still financing and usually has a warranty – honestly, if a year-old used car does NOT come with a warranty, something went horribly wrong.

          Smart or not – with used cars, as young as I was, I only saw the outcome of owning a used car – this wasn’t once or twice, but repeatedly with multiple family members.

          Maybe it was a “traumatic childhood event” either way, I’m scarred for life.

          • trentblase says:

            Wait, financing is a bonus for you? You can finance any used car with your bank, credit union, etc. although the rates are higher than for new. Also, warranties are completely transferable. So even if you buy a 1-year old car from a private party (not certified, which raises the price), you will still have a few years on the warranty (assuming a car with a decent original warranty, of course). And there are a million third parties that will sell you an extended warranty, although it’s probably a rip off.

      • Nigerian prince looking for business partner says:

        I think it really depends. Yes, a $3,500 deposit can go a long way towards paying down a new car but even then, you’ll be stuck with a $250 – $300 car payment every month. Preventive maintenance is preventive maintenance and even on a car you bought new, you’ll still be paying for things like tires, brakes, transmission fluid changes, coolant changes, spark plugs, and timing belts. These are all things that would be in addition to the $3,000+ year in car payments. Once the loan is paid off, you’ll probably be pushing 80 or 90,000 miles and some expensive maintenance will come due.

        $3,500 wont get much of a used car, especially since cash for clunkers took a lot of good, low cost cars off the market. If the car has a lot of other problems, then putting that much into it for repairs is just throwing the money away. If car has a reasonable maintenance history and no known problems, it should be good for another 50k miles with no big surprises. In the OPs case, he’s already bit the bullet by replacing everything associated with a new headgasket and there’s no reason the car shouldn’t make it several more years with preventive maintenance and expected repairs.

        I think it all comes down to:
        1. How much tolerance you have for wear-and-tear stuff (worn seats, broken power windows, etc.).
        2. How flexible you are in terms of having a car out-of-commission for some expected part failure.

      • _UsUrPeR_ says:

        I was really not wanting to use this phrase, but “I work on my cars at home”. Seriously though, if you are going to buy a used car, you had better know how to work on them, or have an itch to learn, because buying a used car and finding out it needs some work can be a real killer if you are having somebody else do the work.

        For instance, I purchased a used car, a ’93 Toyota MR2, with 181k miles on it. I KNEW I would be replacing major components in the near future. It turns out I was correct. The next day the engine seized up! :D

        I spent $400 buying a junk yard motor, and that worked out really well for me. I put it in myself, and the car was running and drivable again. If you are not prepared to get your hands dirty, you probably should not be purchasing a used vehicle.

      • Coles_Law says:

        Car talk did a comparison and found used as almost always cheaper. they have a detailed article I couldn’t find, but it’s summarized here:

      • dizzy says:

        Neither. Paycheck to paycheck, baby. :/

  2. pecan 3.14159265 says:

    We’re saving and stimulating the economy, but in an intelligent way. We’re saving money in the long run by spending money to replace the handmedowns and Ikea furniture (though we’ve kept some Ikea furniture because we like it…). Hopefully, spending more money on solid furniture that we hope to have for the next decade will help us s ave money in the long run. Not to mention the psychological benefits – we’re active participants in how we want our home to look, and even though we’re homebodies anyway, we’re going to be even happier about our home and much more proud of how it looks.

    • pecan 3.14159265 says:

      I also forgot to mention that aside from spending intelligently, we’re still hoarding money like squirrels hoard acorns.

    • joe23521 says:

      I think it’s okay to spend money without trying to justify it as “saving” money. If you have the money to spend, good for you. If you feel guilty about spending it, then reconsider.

      • pecan 3.14159265 says:

        I don’t feel guilty about spending the money, it’s just sticker shock for people in their mid 20s who have never had to buy furniture before. High quality furniture is expensive, as we’re finding out. And I don’t think it’s an excuse – I really do justify it because I think it’s saving us money in the long run. We’d rather spend more for furniture if it means we won’t have to replace one crappy piece of furniture three times in the time we could have kept one piece of high quality furniture.

    • Bohemian says:

      We are not spending because we just don’t have any right now. The cost of everything went up considerably in the last 1-2 years and never came back down. Anyone remember those hikes in wheat and rice prices that jacked groceries? What a bunch of hooey. All of our utilities went up about the same time too.
      Now just adding insult to injury my work has pretty much dried up. I do freelance work. Companies are not hiring and if they are your competing with every starving desperate out of work schmoe and kids out of college who will work for next to nothing. Work from individuals or small entities is gone too. People either don’t have the money or are scared to spend it on anything that isn’t absolutely urgent.
      So were stuck mostly on one income. Now heap on this multiple household appliances that are old and falling apart beyond repair and two used vehicles that both need major work. The entire thing just makes me crabby.

  3. ChuckECheese says:

    People might feel more spendy if they had stable jobs with living wages. And they might want to buy things, if only every agreement and transaction, from credit cards to cable subscriptions, didn’t come with a list of onerous fees, lengthy contracts and fine print.

    • Destron says:

      No doubt. Most people these days can barely afford to live, much less spend extra.

    • jurupa says:

      Whats a living wage? I see people here demand such a thing but no one seems to actually describe what it is as far an actual number goes.

      • FrugalFreak says:

        When employers pay more in earnings than what your frugal life costs nowadays. The business execs are living fine, they just don’t care if you do.

  4. NarcolepticGirl says:

    Man, I haven’t been saving anything. We’ve been catching up with stuff since we were poor last year. Bought a washer & dryer, summer clothing, better (more expensive) food, getting our car tuned up properly, furniture, etc.

  5. coren says:

    I’m saving, got a nice chunk for a down payment once I can get a better paying job.

    My brother on the other hand, can’t save to save his life. And he’s the one in finance.

    • A.Mercer says:

      I have family too that can’t save a bit. One relative spends all of his money on vacations, new cars, and various toys for his hunting habit. Plus, his wife is a big spender and they love to constantly buy gifts for their little girls. Another fancies himself to be a pro fisherman and spends all of his money on all kinds of tackle and boats and tournament fees and travel to get to and from these places. He makes a little money every now and then but no where near what he puts into it. He dreams of making the big time where he wins the big money.

      Both of these guys go to my grand parents whenever they need money to get out of trouble. Truck breaks down, ask the grand parents. Get behind on the mortgage, ask the grand parents. Neither of these guys are saving for retirement and I believe they think that they will get a nice inheritance for the grand parents. I think they will have a surprise when they find that they have drained all of the money away before my grand parents die.

      When that happens I believe they will branch out and try to find other relatives that have put aside money. I have a feeling there will be a big falling out between me and them one day.

      • Bativac says:

        Man, I thought my family was the only one. At this point, my cousins have drained any and all equity of my grandmother’s house, and when she passes on (hopefully not for a long time!) my dad and his siblings will have to sell the place to pay off the debt.

        Family. Grown people that cannot support themselves due to their own poor decisions. Oof.

  6. 44Wadeable says:

    I sure haven’t been stimulating the economy this summer; it’s the first summer since my early or mid teens where I haven’t been working regularly. My graduate program (tuition + stipend = yay rent money and having something to do) can’t start up again soon enough! Heck, I’m at a point where I’m considering more degrees in lieu of trying to find a legit job in this lousy economy. I’d be in panic if I had a family to support.

  7. Pinget says:

    So every time a story like this pops up in the news I wonder, if Americans were saving for retirement, and other purposes, like the experts tell us to, wouldn’t it crash the economy? If a little jolt like this is such a big deal? So why do they keep giving out the advice? They want the economy to die?

    • Loias supports harsher punishments against corporations says:

      It’s an interesting contradiction, no? Experts who know about saving and personal finance tell consumers to have a good nest-egg, a cash cushion, and to utilize savings plans like 401(k)s and IRAs. Experts who know about the U.S. economy as a whole and saying that the economy is stalling because people are saving.

      Saving is not a bad thing at all, and experts have been telling us to do this for years but we never listened. Not that we’re struggling, consumers are savings everything they can. The pendulum has swung the other way. The ironic part is that right now we need infusion of cash into the economy to ramp it up and bring it to former numbers, but this is the exact situation that makes people not want to do so – uncertainty. So while experts tell us to spend, so that the economy improves, we don’t want to.

    • areaman says:

      I believe this is what’s sometimes called “paradox of thrift”. There’s many many ifs, ands, and buts (some of which are described below) but it’s a good label for this post.

  8. quirkyrachel says:

    I have a stable job, but not a living wage (I know, I shouldn’t be complaining since I chose to work in non-profit). But plenty of people don’t make a decent living wage. So why spend?

    Plus I’m sure that the extended financial downturn has caused people to not only look at their spending habits, but also to experience not buying everything in sight. They might have figured out that they don’t need so much junk to be happy.

  9. myCatCracksMeUp says:

    We’re saving a lot, but fortunately we’re also able to buy some fun-to-have electronic gagets too. We’ve both been working a long time, the kids are grown and self-supporting, and we’ve been very lucky with keeping our jobs so far. But nothing is ever sure so we save even more than we would otherwise just in case one or both of us lose our job(s).

  10. TouchMyMonkey says:

    As long as shit keeps breaking at the Monkey House, I have to keep saving money. Or rather, trying to.

  11. TheGreySpectre says:

    Saving, I am hoping to buy a house next year.

  12. dolemite says:

    Kind of a mix of paying down debt and saving. The debt is hardly coming down fast though. It will be years before the credit cards are paid off at this rate.

    • Bativac says:

      I’m doing the same thing. I try to split half a paycheck between credit / student loan / car and the other half into savings. It’ll be a year or two but I’ll be debt free (well, except for the house) and have a nice cushion of savings by the time it’s all over.

  13. Jozef says:

    Running about 30% personal savings rate (post-tax). I live alone and just don’t feel like I need more things…

  14. joe23521 says:

    Saving as much as possible, but then things like dental procedures happen that cost thousands of dollars that I’d rather spend elsewhere. Sigh. But I guess that’s one reason why we save to begin with.

  15. Starfury says:

    Debt: $5500 to in-laws, 0% interest rate for recent house repairs

    No other bills, so we’re saving and not spending.

  16. HogwartsProfessor says:

    I’ve been trying to get caught up. Adding on those damn medical bills didn’t help. I’ve been cutting back where I can, but I’m just barely able to pay everything. No chance right now of saving.

  17. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    Saving some and paying down debt too. Not buying ANYTHING unless it’s food or an absolute necessity.

    Right now I’m making sure I’ll have enough money put back for home heating oil. I know it’s in the 90’s outside, but before you know it, the temps will fall and the furnace doesn’t run on rainbows.

  18. Master Medic: Now with more Haldol says:

    I like how it’s implied that we savers are killing the economy and if we would “just” not be so uppity and go out and buy things everyone would be riding the 2007 economy train again.

    I’m sure the statement by Geithner that unemployment would rise, again, will assuage any job loss fears and get our wallets open.

  19. FrugalFreak says:

    YAY America! Saving is smart, aren’t you glad you save, Don’t you wish everyone did?

    Down industry, You’ve been a bad dog.

  20. floyd fan says:

    It’s getting easier for a person to not spend money foolishly right now, since you can lose your job so easily.

    I’m both saving and paying down debt. I have a good job with a decent (for this area) salary, but there’s no way I’m getting caught with my pants down.

  21. dizzy says:

    Neither. Paycheck to paycheck, baby. :/