Consumer Confidence and Savings Increase, Recession Long From Over

Consumer confidence is stabilizing in the U.S. after a decline for 18 months, according to a Reuters report, but cuts in household spending and increases in household savings could prolong the recession, according to the Wall Street Journal.

"It looks like we have hit bottom and so there are glimmers of hope," said Clifford Young of Ipsos Global Public Affairs, the international market research and polling company that carried out online polls for Reuters. "What we're seeing is that consumers for the most part have been scared, they have cut expenditures and increased savings," he said. "The uptick won't be as fast as the decline, but if the United States is stabilized that's really important in the global sense."

The survey of 23,000 people from 23 countries took place from April 14 through May 7.
In the U.S., consumer confidence rose two percentage points to 13 percent. The survey also revealed that about 75 percent of households cut spending in entertainment, luxury items, vacations, clothing, energy consumption and gasoline.

Although the increase in Americans saving more of their paychecks may lengthen the current economic downturn, the Wall Street Journal says it could strengthen the financial health of U.S. households as well.

The government's stimulus package, which extended unemployment benefits and gave most Americans more money in their weekly paycheck, contributed to an increase in income and personal savings, according to The Journal, as a percentage of after-tax income rose to 5.7 percent in April, up from 4.5 percent in March and well above the zero savings rate reported a year earlier.

"In the United States, saving rates will have to increase, and the purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past," Treasury Secretary Timothy Geithner said Monday in a speech at Peking University in Beijing.

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