Ahead of the holiday shopping season, Americans held their purse strings tight and chose to save their wages rather than spend, pushing the personal saving rate to 5.6 percent in October, the highest in nearly three years.
Unsurprisingly, as spending fuels the economy, The University of Michigan’s Consumer Sentiment Index for November fell to 91.3 from a mid-month reading of 93.1.
“The data indicate that consumers have become increasingly aware of economic crosscurrents in the domestic, as well as the global, economy,” said Richard Curtin, the survey’s chief economist. Conversely, consumption climbed only 0.1 percent in October from a month earlier, according to Commerce Department estimates.
And it is clearly hurting retail. Big chains, including Nordstrom and Macy’s, warned this month of an unexpected slowdown in spending and a slow quarter. Analysts suspect piled up inventory might be causing this slump. “The anticipated inventory drag has only been postponed. Inventories will still need to come into line with sales,” said Nariman Behravesh, chief economist at IHS Global Insight, to The Wall Street Journal.
At $761.9 billion, the level of personal saving was also the highest since the final month of 2012. While this might be good for the economy in some way, retailers are left struggling to understand consumer motivation for savings.
Sandra Cochran, president and CEO of Cracker Barrel Old Country Store, said: “We’ve certainly spent a lot of time here trying to understand the consumer, and they really are [angry] right now — it’s a bit of a mystery.”