US Savings Rate Crashes To 10 Year Lows As Spending Surges Most Since 'Cash For Clunkers'

Tyler Durden's picture

While incomes grew at an expected 0.4% MoM, US consumers spent at an exuberant 1.0% MoM clip - the biggest monthly rise since Aug 2009 (cash for clunkers). To cover this spending surge, the savings rate tumbled.

 

The last time - Aug 09 - that spending surged like this was when the government unleashed 'cash for clunkers', it plummeted the following month...

Spending on durable goods rose 3.5 percent after adjusting for inflation after a 1.4 percent decline in August.

Outlays on services rose 0.3 percent, while spending on non- durable goods also advanced 0.3 percent.

Under the hood, the PCE Deflator printed as expected +1.6% YoY.

Private workers wage growth continues to outstrip government workers' wage growth YoY and upticked in September...

And while outgoings surged with relatively flat incomes, the savings rate plunged to its lowest since Dec 2007 to enable the spending...which just happens to be when the last recession started.

As Bloomberg warns, the jump in September outlays was driven by purchases of durable goods including the replacement of motor vehicles lost in recent flooding from hurricanes. That means the latest surge probably overstates the strength of consumer spending.

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FreeShitter's picture

Seeing new cars, trucks everywhere on the road, reminds me of 06.

Lost in translation's picture

Yep.

Academic advisor colleague of mine just bought her spouse a new - as in, 2018 new - Chevrolet Corvette for his birthday (he’s a general contractor). $65K.

The university pays the advisors ballpark $135K.

SMFH

1 Alabama's picture

and just think, that money otherwise could have gone to something useful

ItsOver's picture

Maybe the main thing is that she sounds like a state employee - guaranteed pension and healthcare for life, so why should such royalty worry about her monthly cash burn rate? The taxpayers are financing the Corvette, not the car lot.

atomp's picture

That's 50% inflation in 10 years for the vette, not as bad as I thought (feel). Blows my 100% in ten years theory out the window. (for now)

jamesmmu's picture

Its true, especially the new cars I see are almost all are very expensive. 

asteroids's picture

Where the fuck are you Americans finding the money to buy all this shit. I'm driving a 20year old car, nothing wrong with it, other than the rust which will eventually destroy it.

Haus-Targaryen's picture

I cannot understand it either. 

I made ca., 400% more than the average German *FAMILY* last year and I drive a 12 year old car, don't engage in enregious consumer spending and I have no fucking clue how I could justify a 600€ montly car payment. 

No one saves anymore. We all live hand to mouth with Monopoly funny money and I don't see this as sustainable. 

We're truly screwed. 

 

JMT's picture

Do germans drive those small hatchback type cars or mini coopers like you see in Britain?? British seem to like smallish cars like the Honda fit or the Mini Cooper. Is it because fuel costs much more than in the USA?

Justin Case's picture

Maybe they aren't buying them, they're renting them for 5 yrs. Mericans can't afford to buy cars.

Silver Savior's picture

I am driving a 95 Accord with a wrecked front end. About 250k miles on it. I don't want anything else. I laugh at the new vehicles people buy. If I ever need a new car I am thinking another 95 Accord. Probably will pay no more than 2k. 

Justin Case's picture

Corvette is a pussy magnet though.

I usually OWN a car for a decade. My current one is a 2003 RSX. Runs like new. Cars are just a waste of money. Soon as you drive a new car off the lot it depreciates 30%. Renting a car you have to follow the maintenance schedule or yoar in violation of the lease agreement. That's where the car companies make money, then residual value when it's sold.

 

JMT's picture

the maintenance is included in the lease meaning that as long as you bring to dealer, it is serviced as per the lease agreement with no extra money out of pocket

cynicalskeptic's picture

Have only bought new cars for the last couple decades (am near 60).  Usually drive them a decade - todeath - but it's getting harder.

First few cars - college through first decade of marriage were always used and cost less than $1000 (usually less than $500) and I did all the work on them.

They've made it near impossible to do any serious work now - even though engines last longer (no need for valves and rings) , all the electronic BS seems to have a limited life and cost a fortune to fix.  

Ironic - they CAN build far more durable cars now but something always goes early.  Had all the brake lines rust out on a Chrysler (pretty common it seemed) while the Ford engine cradle rusted through (even WITH the recall fix).

I truly believe they build cars to last through the 3 year lease (and not much longer).

kermudgen's picture

They take on more debt.  As long as they think they can make the payments there is no problem.  

 

I live in a neighborhood with home values between $150k - $250k and see folks driving cars that cost $60k plus all the time.  It used to bother me.  Now I just smile and shake my head.  That's why the kneeling thing is so much bullshit.  The inequality story you're (we're) hearing is the whining of mentally retarded demographic that have made and will continue to make VERY BAD CHOICES until we hit  the reset.  I'll never be rich but I will never be hungry, without a roof over my head or without a couple of beers in the fridge.  I just wonder what is going to happen when the bubble does pop.  Less than 50% of Americans have $1,000 in the bank for emergencies.  What the hell is going to happen when they can't borrow any more, have no cash, no food and no beer? 

 

Nothing says America more than taking your new "Benz" through the drive-thru at McD's, paying for it with a credit card and parking it in front of your rented apartment.  

GunnerySgtHartman's picture

reminds me of 06

Houses, too ...

Giant Meteor's picture

With brand new 7 year enslavement terms ...

aliens is here's picture

A lot of hood people and Refugees driving new cars. I think the economy is going well for them at your expense.

Chuck Walla's picture

Truly, I see lots of new Bimmers in shit neighborhoods.

Silver Savior's picture

Everytime I see a brand new car or truck I immediately think huge liability. Not to mention depreciation central. I then want to see what kind of person is driving it. Once I see them I immediately think idiot.

JMT's picture

Usually it is a 20 or 30 something millenial poseur or ex. military douchbag type.  

LawsofPhysics's picture

LOL!

...spending money they don't have to impress people that they don't like...

"Full Faith and Credit"

Buck Johnson's picture

Waiting for the bubble to burst.

 

 

Silver Savior's picture

Me too. Tired of this fake bullshit and that in turn makes people fake too! Get it over with!

BigWillyStyle887's picture

OK so prices go up and spending goes up while savings go down and wages go nowhere. What exactly about that sounds like a great economy?

 

Im also getting really fucking tired of seeing these graphs of private sector vs public sector wages which do ZERO justice to the fact that the private sector has to pay the fucking public sector and THEN they get ridiculous benefits/pensions for all the fake fucking work they do. Modern day government is the scourge of humanity.

 

The second rennaisance will begin with the balkanization of every modern country in the world. 

LawsofPhysics's picture

Get with the program dude, feudalism 2.0 and Global Weimar are on!

"Full Faith and Credit"

Justin Case's picture

It's called extend and pretend.

Tolomeo's picture

Tic-tac, tic-tac!!!

RagaMuffin's picture

Wait until the HCA premiums hit since its a foot race between Health insurance and a car, and so far I've yet to find 72mo financing for insurance  ;-)

JMT's picture

The HCA (or ACA) only affects 7% of the population..  Remember that 80% (EIGHTY PERCENT OUT OF 100% of the 325 million in the USA) are covered by EMPLOYER BASED NON GOVERNMENT BASED INSURANCE..  The other 20% -- 7% ACA, 5% Medicaid and the rest covered by Medicare (the insurance for "old" people).  

 

Also HEALTH INSURANCE NOT EQUAL HEALTH CARE. The majority of doctors do not accept any government based program just like landlords don't accept section 8 tenants. same analogy since doctors & hospitals are by principal against any government based aid 

BANKERS-WE ARE COMING FOR YOU's picture

BITCOINIZATION / BITCOINASSIMILATION..all fiat is being pulled to the center through graviity. The closer it gets, the stronger the pull. The event horizon will start end of 2019. If all your fiat assets are not in crypto. You will end up with zero.

 

aliens is here's picture

Are you pushing crypto? How do you know people who owns them will not end up with zero?

Silver Savior's picture

I only invest about 5k into this crypto bullshit just for kicks. And not in Bitcoin. I feel it will eventually end badly.

Silver Savior's picture

Should have a minor position in crypto but the bulk of everything in physical silver and gold. 

itstippy's picture

The "Savings Rate" as calculated by the U.S. Department Of Commerce, Bureau of Economic Analysis, can be a highly misleading metric.  Read how the October 30, 2017 data is calculated here: https://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

Basically, it's Personal Income minus Personal Spending.  It's NOT "how much people's savings have gone up or down".

Unrealized Capital Gains aren't counted as income.  If your 401K retirement savings balance goes way up or down due to returns on investments, your "Savings Rate" doesn't budge.  Ditto for home equity. 

If you pull money out of your 401K and spend it, your savings rate doesn't change. The money pulled from your 401K is considered "income". 

If you sign a loan on a $40K truck, no money down and 100 easy payments, you haven't spent $40K.  Only payments made count as "spending".

If your uninsured house is destroyed by a flood and you lose everything and have to move in with Aunt Irma, your "Savings Rate" doesn't move. 

You get the idea.  

JMT's picture

More like lease a Jeep or Escalade for $499 a momth for 24 - 36 months (with max miles 12,000 a year) plus insurance which probably costs from $120 - $300 a month, as well as fees for registration & sales tax ( 6.25% - 8.875%) ...  

yellowsub's picture

Didn't know Americans had any savings left to dip into...

Silver Savior's picture

What if you removed the cash from financial institutions and bought gold and silver as a form of savings? I may have a zero balance but do I..........? Ha ha ha. Fuck this paradigm.

Nick O'Teen's picture

I had a lot of coworkers make fun of me over the years for driving a 20-year old car, especially since I am in a professional position and skirt around the 6 figures. I instead save my money, don't live paycheck to paycheck, and several years ago purchased rental property in an appreciating market that is getting ready to provide me with a handsome profit. I also stacked PM over the years, really like silver, given its extremely suppressed price. Then I threw a little money at this new thing I ran across called "bitcoin" in 2011....boy did that ever pay off ($3 at that time). Just wish I would have bought more back then.
I still listen to my coworkers all the time whining about their struggle to pay the bills every month. But they also buy a new car every other year, take expensive vacations, and live in huge houses....maybe I'm doing it wrong, I don't know. I will keep doing what I've been doing, works for me. I did for the first time in my life buy a new car 2 years ago, mostly because I changed jobs, new job required it, and I get a car allowance...so that works for me.

JMT's picture

I thought a 5 year old Honda with 50,000 miles on it is considered ancient...   For long trips now I just rent a car for $400 or so a week (plus the uber or lyft to and from rental facility of $20 - $30 each way) ..  Its less wear and tear on primary vehicle especially when driving in & around the NYC area -- the condition of the streets, stop & go driving increases wear...   But a 20 year old car?? I doubt that would even pass the annual state inspection required in NY or Mass..  

Remember that cars are good mostly until 100,000 miles before repair costs really start to escalate

Pop3y3too's picture

This is to be expected as more people wake up and realize their cash is quickly becoming worth less - or worthless. Better spend it while it still gets you something.

 

I have a whole bedroom devoted to long term storage food that I'm pretty sure will be worth its weight in gold some time before its expiration date. 

 

At the very least by the time it's eaten it'll be worth much more than I paid for it.  There's your ROI.