There is over 10 months of personal consumption expenditures (PCE) sitting in cash and money market funds – this is the most in over 20 years.

We know that consumers and SMBs have hoarded cash but how does that relate to what is typically spent in a given month?  Since the Great Recession, U.S. consumers and businesses have put away more cash faster than any time in recent history.  There is now almost 10 ½ months of PCE parked in cash, savings deposits and money market funds earning practically zero percent.  The US consumer who has a job is in great financial shape compared to the last 20 years.  This condition is NOT consistent with the onset of a pronounced or prolonged economic slowdown or recession. Jeb Terry, Sr. Aug 17, 2011

Consumers are not in a state of financial distress as they were in 2008.  In addition to months of spending held in cash reserves, they have more disposable income to cover their reduced debt service.  The US consumer has sufficient income to cover their debt service by ~8.7X, a 20% improvement over 2008.  This is another indicator that any sentiment induced economic slowdown can be short lived and not severe.

 

Aberdeen Investment Management – a guide service for micro-cap technology investment

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