Newfound Thrift Battering Economy

Sharp rise in savings rate expected to lengthen recession
By Rob Quinn,  Newser Staff
Posted Jan 6, 2009 1:51 AM CST
Economists say Americans are saving more and spending less just when the economy needs them to do the opposite.   (Shutterstock)
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(Newser) – Americans worried about the recession are stashing away cash at the highest rate in decades—but economists fear that the thrift will prolong hard times, reports the Wall Street Journal. The national savings rate has rebounded from less than zero to levels expected to hit 5% or higher this year just when consumer spending is needed most.

America’s thrifty new habits have brought about the sharpest decline in consumer spending in nearly 20 years, and economists predict the trend will shrink the country's GDP significantly. "You look around, you see the closing stores, and you know someone needs to spend," said an Idaho resident.