Americans' savings rate up to almost 7% - who benefits?
According to the Bureau of Economic Analysis, the personal savings rate in May 2009 was 6.9%. This a 15 year high and a far cry from the negative savings rates of just a few years ago. Although a part of the increase in savings comes from the large stimulus bills passed recently, most of the increase seems to come from changes in Americans' spending habits. So who benefits from a higher personal savings rate?
First of all, it seems that banks should be happy with this development. Since the stock market took a nose dive most people are putting their savings in cash deposits. According to the LA Times savings deposits at U.S. banks have surged by $4.48 trillion since last September. Additionally, banks are paying very meager rates on savings deposits now, so this means that they are raking in oodles of profits when they lend the money out.
Next, businesses that help people save money are also winning big as Americans shift to being more thrifty. For example, stores like Walmart, Ross, and Dollar Tree are doing well because they align with consumers' goals of paying less. Vegetable and fruit seed companies also reported rises in sales due to consumers' desire to save money through growing their own food. Basically the concensus is that frugality is now "in".
Many economists say that the increase in savings rate is actually bad for the current recession because it means that Americans are spending less as a whole. Since America's GDP is mostly based on personal consumption it makes sense that more saving takes a bite out of the GDP. However, it seems to me that Americans are just starting to behave rationally and that cannot be a bad thing. Historically Americans' savings rate has been above 7% until the early 1990's and it seems that things are just beginning to return to normal now. I think the higher savings rate shows that Americans as a whole are starting to realize that living on credit is not sustainable, and eventually this shift in mentality will benefit the country as a whole.
Who do you think benefits the most from the higher savings rate in America?