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Last Tuesday, the retail sales data for September rolled in. U.S. retail sales rose by 0.7% month-over-month in September 2023, outpacing the previous month's upwardly revised gain of 0.8% and surpassing the anticipated 0.3% jump. Naturally, following these figures, chatter centered around the resilient consumer, seemingly unfazed by escalating gas prices and borrowing costs, eager to grab that new winter hoodie or a pair of Lucchese boots. However, this uptick in spending has taken a toll on personal savings, which saw a notable decline in September.
Excess savings have dwindled to just over $200 billion, a mere shadow of the post-pandemic stimulus peak. Historically, this is the steepest and most rapid savings decrease in U.S. history. For some perspective, the savings rate in April 2020 peaked at 32% of income, whereas now it stands at a mere 3.9%, reminiscent of the savings rates during the Dotcom and GFC-era recessions.
There's rising apprehension as we wait for the Fed's Q3 consumer debt report. With credit card usage going past a trillion dollars and the reactivation of student loans, questions arise regarding the source of future spending. Notably, credit card interest rates have climbed to over 21%. By comparison, during the onset of the Dotcom recession, they hovered around 16% and were at 14% as the GFC hit. The current scenario seems problematic because credit card usage surged by over 100% in the aftermath of the GFC.
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