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Saturday, April 17th, 2010

This Week in the Economy

The week of the nation’s tax filing deadline saw some important financial news. Here’s a summary of what happened and what it might mean for you.

Recession’s End Unclear

The Business Cycle Dating Committee of the National Bureau of Economic Research, the group responsible for determining official start and end dates for recessions based on analysis of various economic indicators, announced this week that it cannot yet declare an end to the recession.

The press release indicates that, though many economic indicators have improved in recent months (including subprime mortgage defaults and retail sales), it is still too early to say whether or not the recession has officially ended.

Interestingly, though, one member of the committee disagreed with the committee’s final decision and issued a memo indicating as much, citing the following two indicators as primary reasons why he believes the recession has already ended:

  • Real Gross Domestic Product (GDP), which measures the market value of all goods and services produced inside a country in a given year, has reportedly improved since June of 2009, from what’s called the “trough;” and
  • Real Gross Domestic Income (GDI) has also apparently improved, though not for so long a period – the memo indicates it started its upswing in the final quarter of 2009.

He also notes that the economy’s recovery should not surprise anyone, suggesting that, because we “fell” so hard, our “bounce” back should be swift and forceful.

Unemployment Benefits Extension in Congress

Though some economic indicators may be on the upslope, unemployment still hovers close to 10 percent, meaning that millions of American families may not feel the recession’s end for a while.

But there may be hope for such families: a report from the New York Times notes that the Senate has voted 60 – 40 in favor of extending unemployment benefits to out-of-work Americans.

The measure, should it pass both houses of Congress and get signed into law, would apparently cost somewhere in the neighborhood of $18 billion, which seems to be a point of contention for many Senate Republicans.

Unemployment is often considered a strong indicator of bankruptcy filings, so keeping an eye on the unemployment numbers can be a good prediction of Americans filing bankruptcy.

The (Higher) Future of Taxes

Newsweek reported this week that, thanks to serious budget deficits at the federal level and an aging American populace, there’s a good chance taxes will increase – even sharply – in coming years.

While this may not seem like the best news, take this year to enjoy your current tax level!

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Tuesday, October 6th, 2009

Survey: Shoppers of All Income Levels Cutting Back

A recent survey conducted by IBM found that Americans are trimming their spending in this recession, no matter how much income they pull in each year. Here’s a look at how people are saving and how to make similar cuts work for you.

Saving Strategies at the Supermarket

  • Shopping around: 49% of respondents have apparently begun hitting multiple stores to get the best deals on food products. This strategy can be effective, especially if you currently rely on costly convenience stores for the basics. But beware of driving too far for a bargain – your time and gas are valuable, too.
  • Buying less: More than half (52%) of those surveyed noted that they now buy less at the grocery store. If you choose to follow this strategy, be sure you cut back on expensive items you don’t need and food you end up tossing rather than eating. And don’t buy so little you’ll be hungry all the time – grocery store prices are much lower than those at restaurants and fast-food joints.
  • Looking for new foods: Among those making $20 thousand or less per year, 45% admitted to turning to foods that kept them full for longer periods of time. This can be doubly effective, since many foods that meet this criterion (such as oatmeal, lentils, rice, beans and potatoes) are generally inexpensive as well.
  • Trimming luxury brands: A significant number of those surveyed (34%) mentioned opting for less-expensive versions of health care and beauty products, rather than sacrificing them altogether. This can be very effective, especially if you compare ingredient lists to make sure you’re getting exactly what you want before you buy it.

Frugality Beyond the Recession?

Perhaps surprisingly, a majority of respondents indicated that they will be continuing some or all of their money-saving strategies once the recession ends – 60% said they’d keep exploring various grocery stores for bargains.

This is perhaps the wisest move of all.

And, based on a study conducted by AlixPartners earlier this year, the frugal future of Americans may be more than an optimistic hope.

In fact, the group’s study suggested that our country’s spending levels after the recession will be at only 86% of what they were before the stock market collapsed.

That may be bad news for some industries, but those dealing with debt, job loss or rebuilding finances after filing bankruptcy, every little bit helps.

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Friday, September 11th, 2009

New Book, Credit Numbers Celebrate Cheap Americans

Not too long ago, spending on credit was in, especially in the United States. But, since the global economic recession has humbled a lot of us financially, it looks as though thriftiness is making a comeback.

Exhibit A: In Cheap We Trust

Journalist Lauren Weber recently published a book about the “cheapskate” roots of contemporary Americans. In her research, she found that frugality was one of the principles on which the country was founded:

  • Using less meant buying less – generally from England and other established countries that we, as a nation, wanted to be independent from.
  • Working hard meant expanding the businesses and farms we owned, which would lead to hiring more Americans and expanding the nation’s workforce.

Weber also highlights how and why cheapness became passé – with the introduction of credit cards and easy credit in the 1950s, people were all too ready to adopt the not-so-thrifty way of life plastic allowed them. And so it became hip to spend.

The Verdict: Take advantage of the trend of cheapness to whip your personal finances into shape. And you might want to check out her new book (from the library, of course).

Exhibit B: Consumer Credit Drops in July

July marked the sixth straight month in which Americans cut back on consumer borrowing, according to the Federal Reserve. In fact, American consumers cut back by 21.6 billion dollars – significantly more than the approximately 4.5 billion dollars expected by many economists.

Here’s a breakdown of the important numbers:

  • Monthly decrease in borrowing: 21.6 billion dollars.
  • Decrease from June: 10.4 percent; this drop was the largest since a 16.3 percent decline in June of 1975.
  • Decrease in revolving credit: 8.0 percent.
  • Decrease in non-revolving credit: 11.7 percent
  • Total current consumer credit: 2.47 trillion dollars (in the third quarter of 2008, before the stock market plummeted, total borrowing was close to 2.58 trillion dollars).

Even with the assistance of Cash for Clunkers and the predictions of many economists that the recession (and the bankruptcy wave) is coming to an end, American consumers are speaking clearly with their wallets. While some trends end before you’ve even had a chance to see what they’re all about, it looks like American frugality is here to stay – at least for a little bit longer.

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