U.S. Consumers Ditch Handbags in June, Stuff Money into...Savings?

July 31, 2012 10:58 AM EDT
Consumers, it seems, are hording cash in (*drum roll*) savings. In June, savings rose to 4.4 percent, its highest level in a year. Consumer spending accounts for 70 percent of the U.S economy, so the effects the additional savings has on retail stocks is worth noting.

According to today’s data release by the Commerce Department, personal income increased by 0.5 percent, the largest gains since March. Analysts were expecting an increase of 0.4 percent. Household purchases, meanwhile, were unchanged at 0.1 percent.

In other news today, shares of luxury handbag maker, Coach (NYSE: COH) declined as much as 19 percent. The steep drop is a result of dramatically slowing growth in North America. One year ago, sales in North America showed a gain of 10 percent. Today, according the company’s earnings report, North American sales were a paltry 1.7 percent. Some analysts were calling for an increase of 5 percent.

It is too early to call today’s results a trend in consumer spending, but investors will certainly be eying luxury goods retailers and related companies in the coming days and week. If it turns out that American, the land of mass consumerism, suddenly turns into the land of the penny-pincher, the global economy is about to be turned on its head.

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