The Boston Area Economy: Saving vs Spending

Recent statistics show Americans are saving faster than they are spending. The shift in consumer spending habits in the Boston area economy began during the most recent recession. The trend looks like it will continue heading into the holiday shopping season and beyond.

The Frugal Boston area Economy

The shift in spending habits in the Boston area economy began in the last recession.

Americans saved over $40 billion in October alone. The savings rate grew to 5.6% — the highest level in almost three years. Spending only rose 0.1% between September and October.

According to experts, when the savings rate increases and spending is lukewarm it often means consumers are worried about the economy. That worry means tighter spending. Despite the higher savings rate, it doesn’t necessarily mean consumers fear a recession. The U.S. Commerce Department reported the economy actually performed better than expected during the third quarter, with growth of 2.1% — higher than initial estimates of 1.5%.

Recent trends in the Boston area economy show consumers are still spending, but are cautious with their purchases. Experts say they may be saving money for larger ticket items. Spending on smaller purchases is decreasing. Big box retailers like Target and Walmart expect sales this year to be relatively flat.

However, big ticket items do seem to be more popular. Automobile sales in the U.S. reached an all-time high this fall, and the sale of new homes are up over the previous year. Large home improvement stores like Lowe’s and Home Depot report increase in purchases of items costing $900 or more, including roofing material and kitchen counter tops.

This shift could mean homeowners are looking to make improvements to better maintain and add value to their homes. As a result, even when homeowners spend money on their homes — their largest asset — they may be accumulating greater wealth by increasing their home equity through adding value.

The bottom line is the Boston area economy is still seeing spending — it’s just more selective and more frugal. And as the saying goes, selective and frugal spending is better than no spending at all.

Also of Interest  Boston Area Consumer Confidence in High Gear

Find more articles and information that may affect the Boston area economy in our Boston area Real Estate News section to your right under Boston area Real Estate Categories. We also post news and tips each day on Twitter and Facebook. Follow us there for even more up to the minute news on the Boston area economy and how it could impact you.