Personal Saving Rate

Source: http://www.StockTiming.com

Will Consumers stop buying and drag down corporate profits?

Yesterday, an Institutional trader said that they are now starting to pay particular attention to the Consumer Credit reports.
One will be released at 3 PM today.

His reason is that, it is now a very important report because of the U.S. Department of Commerce's report on the
fact that Americans have had a negative savings rate since last year.

The chart below is from the U.S. Department of Commerce's "Bureau of Economic Analysis" and you can see the
report at this link ... bookmark it for future reference. http://bea.gov/briefrm/saving.htm

The chart from the Dept. of Commerce is below ...

If you look at some of the recent headlines, you could have seen this one from the Associated Press:

"U.S. savings rate hits lowest level since 1933. Consumers depleting savings to buy cars, other big-ticket items.)

The Christian Science Monitor reported that "Americans have stopped saving for a rainy day. Instead, they are living paycheck to paycheck, depending on credit cards to get them through emergencies, and hoping that the rising value of their homes will give them a retirement nest egg."

What does a negative savings rate mean?  It means that Americans spent all their disposable income, the amount left over after paying taxes, and dipped into their past savings to finance their purchases last year.

The Importance of the Consumer Credit Report ...

Which bring us to the Consumer Credit report.  The reason why the Institutional trader was concerned, is that the negative savings
poses a situation where consumers will have to stop spending beyond their weekly pay check.  He added, that this behavior
leads to maxing out credit cards and that consumers will have to stop buying fairly soon and concentrate on paying down
their credit card debt and loans.  And that ... will create a drop in consumer spending, and that will effect stock profits.
He is not the only one worried about the situation, the Federal Reserve is also worried about it.

Today at 3 PM, the Consumer Credit report will be released.  You can see it at this link: http://www.bloomberg.com/markets/ecalendar/index.html

(What does the Report measure? It measures the outstanding dollar value of consumer installment credit. If it continues to get larger, then
you know the savings rate is continuing in a negative direction ... and that will worry large investors about a slow down in consumer buying.)