Frugal Savers Stall the Economy

Frugal Savers Stall the
Economy
By www.ProfitableInvestingTips.com

http://profitableinvestingtips.com/profitable-investing-tips/frugal-savers-stall-the-economy
Economists do not seem to be
able to decide what the
average family should do with
their income.

The rap on the US economy
for years has been that no one
in the USA saves enough.

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Too many families retire with
insufficient savings and end up
being a burden on the younger
generation is how the
argument by economists goes.

Now, however, people are
saving more and the
economists are still upset! It
turns out that frugal savers
stall the economy, or at least
they did in April 2015.

Bloomberg reports
that consumer spending
stalled in the first quarter as
wage earners saved more and
spent less.

Consumer purchases
unexpectedly stalled in April
as Americans used income
gains to shore up savings,
raising the risk the biggest
part of the economy may take
time to gain momentum after
a slow start to the year.

The unchanged reading in
purchases followed a 0.5
percent gain the prior month
that was larger than
previously estimated,
Commerce Department figures
showed Monday in
Washington.

The median forecast in a
Bloomberg survey of 79
economists called for a 0.2
percent rise.

Earnings increased 0.4
percent, more than projected,
and the saving rate climbed.

Consumers, who’ve been
using the money freed up by
low gasoline costs to pay down
debt or rebuild their balance
sheets, would be more inclined
to shop as wages accelerate.

Sustained improvement in
household spending, which
accounts for almost 70
percent of the economy, is
needed to ensure growth
rebounds as Federal Reserve
officials project.

As frugal savers stall the
economy is that a good or bad
thing?

Over the long run the USA
needs to up it savings rate.

In the short term people need
to spend in they want the
economy to grow.

For the individual investor it is
best to save and invest while
hoping that everyone else
goes on the spending spree!

Manufacturing Back
on Track

Whether frugal savers are
stalling the economy or not,
US manufacturing is picking
up again.

ABC News reports that US
manufacturing growth
accelerates for the first time
in half a year.

The Institute for Supply
Management, a trade group of
purchasing managers, said
Monday that its manufacturing
index rose to 52.8 last month
from 51.5 in April.

That’s the highest reading
since February.

Any reading above 50 signals
expansion.

The pickup in factory activity
suggests the economy may be
growing again after shrinking
in the first three months of the
year.

Still, overall growth remains
slow, held back by a range of
factors.

Americans have been reluctant
to boost spending, even as
hiring has been healthy and
lower gas prices have left
them with more money to
spend.

And the dollar has risen
sharply in value, which makes
U.S. goods more expensive
overseas and drags down
exports.

Economists forecast the
economy may expand at a 2
percent annual pace in the
April-June quarter, after
shrinking 0.7 percent in the
first three months of the year.

As the report indicates the fly
in the ointment for
manufacturing is the
continued rise of the dollar.

A stronger dollar hurts exports
which in turn will hurt
manufacturing, jobs and
income.

Rising US Dollar

Seeking Alpha asks why
the U.S. dollar is rising.

The U.S. dollar is rising as
business spending
strengthens, benefiting
economic activity in the
country.

The U.S. economy is
strengthening as business
spending rises.

New orders of capital goods
[are] rising alongside
increasing shipments.

As economic activity continues
to expand, the Federal
Reserve will be more likely to
tighten policy, leading to gains
in the U.S. dollar.

While frugal savers stall the
economy on a month to month
basis

It will be the rising US dollar
that makes exports
noncompetitive and will
eventually bring the dollar
back down and stimulate the
economy again as part of the
eternal business cycle.

Frugal Savers Stall the Economy

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