“Savings Rate Portends Healthy Holiday Spending”

The savings rate grew to the highest it has been in two years in September to 5.6%. Since this time the rate has been declining and has been stable at around 5%. In turn, the amount consumers spent increased. It increased to 2.2%, which is higher than the estimate of 1.8%. Two reasons for the rise in consumer spending are rise in confidence and a drop in gasoline prices. Earlier in the year when the savings rate was climbing, it was a bit of a puzzle because the savings rate usually falls during a period where net worth is growing. It is estimated in the future that the savings rate should decline to around 4%. The 4% areas represents and area where consumers will not be “under-spending”. On the other hand, the Fed does not want consumers to be under saving either because they want families to have precautionary savings. The implication for this is that with consumers willing to spend more during the Holiday season, it should give the economy a little boost at the end of the year.

http://online.wsj.com/articles/savings-rate-portends-healthy-holiday-spending-1417207785