European consumers are saving at higher rates than before COVID as their American counterparts spend.
As the Financial Times (FT) noted in a report Sunday (Oct. 6), savings in both Europe and the U.S. jumped during the pandemic when people were confined to their homes. However, Americans have since upped their spending, while Russia’s invasion of Ukraine has left Europeans feeling more insecure.
The report, citing new data from Eurostat, said that household saving ratio in Europe climbed to a three-year high of 15.7% in the three months leading to June, compared to a pre-pandemic average of 12.3%.
While the headline rates aren’t directly comparable, the FT said, the trend is notably different in the U.S., where spending has helped drive an economic rebound. U.S. personal savings rate came to 5.2% during the second quarter, while the average between 2010 and 2019 was 6.1%.
“The lower U.S. saving rate has helped propel consumer spending, which has been the key driver of U.S. growth, and a key reason why the U.S. economy has grown more quickly than the European economy,” Mark Zandi, chief economist of Moody’s Analytics, told the FT. “The American consumer has been driving the global economic train.”
Still, there are some concerns about spending levels as American retailers await the start of the crucial holiday shopping season.
“With concerns about inflation and fluctuating consumer confidence impacting purchasing behaviors, holiday shoppers are taking a more frugal approach this year, with about a third planning to reduce spending compared to last year,” PYMNTS wrote recently.
Consumer spending slowed somewhat in August, creeping up 0.2%, compared to 0.5% the month before. Bureau of Economic Analysis data suggested that continuing job growth pressures, combined with early back-to-school and travel-related expenses, could have caused households to ease back on their spending.
“The trend is concerning for retailers as they approach the vital holiday shopping season,” PYMNTS wrote last week.
All the same, consumer confidence in the economy is beginning to improve, which could be good news for retailers. The University of Michigan’s Index of Consumer Sentiment most recent rating was 70.1, rising from 67.9 the prior month.
“While sentiment remains below its historical average in part due to frustration over high prices, consumers are fully aware that inflation has continued to slow,” Surveys Director Joanne Hsu said in a statement. “Sentiment appears to be building some momentum as consumers’ expectations for the economy brighten. At the same time, many consumers continue to report that their expectations hinge on the results of the upcoming election.”
The Consumer Financial Protection Bureau (CFPB) reportedly dropped a lawsuit against Comerica Bank that targeted the bank’s handling of a federal benefits program, alleging that it provided poor service to the recipients of benefits.
The Bureau told a U.S. District Court in a filing submitted Friday (April 11) that it was dismissing the suit, Reuters reported Friday.
The CFPB sued Comerica Bank in December, targeting the bank’s handling of the Direct Express program, which it had administered on behalf of the Department of the Treasury since 2008 and enables about 3.4 million federal beneficiaries to receive their monthly benefits payments through prepaid debit cards.
In its complaint, the CFPB alleged that Comerica Bank deliberately disconnected customer service calls, charged consumers illegal ATM fees, misled fraud victims, imposed illegal terms of service on consumers seeking to stop payments, failed to investigate account problems and forced consumers to close accounts to stop preauthorized payments.
“By deliberately disconnecting millions of calls and harvesting illegal junk fees, Comerica boosted its bottom line at the expense of Americans living on a fixed income,” then-CFPB Director Rohit Chopra said at the time in a press release.
Reached by PYMNTS on the day the lawsuit was announced, Comerica Bank said in an emailed statement that it would continue to defend its record as the financial agent for the Direct Express program and that it filed a lawsuit against the CFPB in November challenging the Bureau’s “regulatory overreach and its handling of this case.”
“Throughout the CFPB’s investigation, we have cooperated by sharing information and data to illustrate the unique nature of this program and the fact that we operate with the oversight of the Fiscal Service,” the statement said. “Despite our good faith efforts to provide this critical context, the CFPB has consistently ignored our arguments and documentation.”
It was reported in March that the CFPB asked a federal judge to pause the enforcement action that the agency filed against Comerica Bank.
CFPB Chief Legal Officer Mark Paoletta said in court papers that the agency was considering next steps and that the new CFPB leadership sought “time to review the matter,” Reuters reported March 3.
