Are US consumers falling back into the same old spending patterns that got them into so much trouble in during the recession?
Data released today showed that the US savings rate fell to an eighteen-month low of 2.7 per cent in March, as Americans spent more than they earned: consumption rose by 0.5 per cent, much faster than a 0.3 per cent increase in personal income.
While the return of the US consumer is good news for the recovery, and was a big factor in the 3.2 per cent growth in gross domestic product in the first quarter, it may also be somewhat troubling.
Some Federal Reserve officials, including Don Kohn, the vice-chairman, recently pointed out that if one good thing comes out of the recession, it will be a more balanced economy, with US consumers spending less and saving more. Households will be on a sounder economic footing, with fewer debts.
But is that process unravelling even before it really started ? Michael Feroli of JPMorgan seems to think so. “Speculation that consumers are reforming, repenting and rebalancing now looks premature or overstated,” he said in a note this morning.
