It would be a serious mistake to enact tax cuts aimed at increasing already excessive consumption, Stephen Roach, chairman of Morgan Stanley Asia, recently wrote in The New York Times.
"The Obama administration needs to encourage the sort of saving that will put consumers on sounder financial footing and free up resources."
Roach says that, adjusted for inflation, consumer expenditures are on track for two straight quarters of decline, a rare event in a consumption-driven American economy, the UK Guardian reports.
"Never before has there been such an extraordinary capitulation of the American consumer," Roach notes.
"Since 1950, there have been only four instances when real consumer demand fell for two consecutive quarters. Declines will exceed 3 percent in both quarters for the first time."
Though most analysts had expected a modest increase in consumer credit for October, the Federal Reserve reports that consumer credit outstanding in the U.S. contracted by a total of $3.5 billion during the month, with both revolving and non-revolving debt sliding.
According to the First Command Financial Behaviors Index, Americans began to spend less and save more in September, when the Index revealed a 29 percent increase in short-term savings and an eight percent rise in payments on short-term debt.
In November, 55 percent of FCFB respondents indicated that they plan to increase their savings in December or decrease the amount of debt they carry, MarketWatch reports.
Meanwhile, household debt contracted 0.8 percent in the July-September period, the first quarterly decline since the Fed began compiling the report in 1952.
Home mortgage borrowing fell 2.4 percent, the sharpest drop on record, according to the U.S. central bank's "Flow of Funds" quarterly report.
Household net worth slipped to $56.54 trillion in the third quarter from $59.35 trillion in the previous three-month period.
© 2017 Newsmax. All rights reserved.