The case for a new national frugality

Time to fire up the SUV, head to the mall and whip out that credit card?

That's what automakers, retailers, restaurateurs and other industries dependent on consumers are hoping, of course. They need this economic malaise to blow over quickly, and that will require Americans to get back into a good mood and open their wallets again.

But there is a school of thought out there that says many people have been permanently changed by the economic blows the nation has suffered over the last year -- the unprecedented quadruple whammy of the dive in home prices, tumbling stock values, soaring energy and food prices, and the credit crunch.

We've all been warned for years to spend less and save more. Maybe we're taking that to heart now.

That's the view of David Rosenberg, a veteran economist at Merrill Lynch & Co. in New York. He has a dour outlook for U.S. economic growth in large part because he thinks Americans have gotten religion about their personal finances.

For many consumers, Rosenberg says, "frugality is now replacing frivolity."

That's evident, he said, in looking at the trends in Americans' personal spending in the last three quarters, as detailed in the government's data on gross domestic product.

Excluding outlays for three key necessities -- medical care, food and utilities -- real consumer spending shrank at a 0.3% annual rate in both the fourth quarter of 2007 and the first quarter of '08, Rosenberg noted in a report this week.

In the second quarter, he said, that same gauge of consumer spending grew at an anemic 0.8% annual rate -- despite the federal tax rebates to about 100 million families.

In fact, many people saved that rebate money instead of spending it, at least by the government's calculations, which subtract personal outlays from personal disposable income. The savings rate derived from that data jumped from a mere 0.3% of income in the first quarter to a six-year high of 2.6% in the second quarter.

But what's to stop that money from ending up in some retailer's cash register in the current quarter?

Rosenberg is betting that a large number of Americans have been frightened enough by what they've seen unfold in the economy this year to keep them from sliding back into spendthrift mode.