This recession has left lot of people to think before they do any kind of purchases, a recent survey done by McKinsey reports:

“90 percent of the US respondents said that their households had reduced spending as a result of the recession—33 percent of them “significantly” so. The survey, which included 600 households in three consumer segments comprising around 40 percent of all US homes,1 found that 45 percent of those who reduced spending did so by necessity, 55 percent by choice”

So this says it clearly that, people now a days are very cautous and they don’t want to be left in streets without any money. This reports even says that, the borrowing rate has also come down.

“In the three months to the end of June 2008, net consumer mortgage borrowing turned negative for the first time since the Federal Reserve began tracking fund flows, in 1946. In the final three months of 2008, net consumer credit borrowing was negative for the first time since the fourth quarter of 2002. Across debt products such as credit cards, mortgages, auto loans, and personal loans, consumers said they were more likely to close or decrease balances than to open or increase them.”

People have started to save, this in turn has increased the deposit rates in banks. The report says:

“the personal-savings rate reached a 14-year high, 5.7 percent of disposable income, in March 2009”

The bottomline: People are really cautious now a days, they cut back their expenses in order to increase their savings. But only after this huge loss event called recession, why dint they think about this this earlier? The report even says that, people borrowed more money than their income, which in turn they couldnt manage to pay their EMI’s or Due’s. Spending more than your ability will always be dangerous anytime. My perception is Indians are really masters in this art – savings.  We normally have the tendency to save isn’t it ?

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