Nation of Savers?

Who knew that the American consumer was actually capable of saving? Data from the Federal Reserve that is cited in The Wall Street Journal story titled, "U.S. Consumer Credit Drops by $7.5 Billion" shows that revolving debt which is mostly associated with credit cards dropped in February by 9.7%. However, it is important to consider why people are saving. It would appear that there is a correlation between the loss of jobs and the lessening of debt. As people fear that they may lose their jobs they are reluctant of over extend themselves.

Interestingly, this decrease in revolving debt appears to be more than a short term blip. Fourth quarter data on U.S. household debt showed a 2% annual rate decrease. This after the third quarter showed a marginal increase of 0.2%. As unemployment increases, it is likely that consumers will continue to save. Likewise as consumers retreat, business will slow their production. It is interesting that saving, the one attribute that many have said the American public lacked the most, may now lead to the further decline of our economy.