This time last year, I--and a lot of other economic commentators--were writing that the financial crisis finally seemed to have turned America's extravagant spending habits around. The personal savings rate, which had gone to virtually nothing at the height of the boom, was back to a better-if-still-mediocre 5%. Luxury goods weren't selling so well, as people hunkered down and tried to pay their debt.
Now it seems that we may have spoken too soon. Personal savings rates are back down to 2.7%. A lot of that can be explained by the recession, of course; unemployed people are net spenders, not net savers, and our unemployment rate is very high.>
But here's a small data point which suggests that there's more to the story: BMW profit exceeded expectations on strong sales of the Series 7, the company's most expensive car. The company's sales in the US rose by 7.5%.
Where are we getting the money? The same place, I suppose, as the buyers who outbid us on at least two houses with all-cash offers at substantially above the asking price. Whether this return to slightly irrational exuberance is disturbing or heartwarming, I will leave as an exercise for the reader.
(Nav Image Credit: Jeff Glucker/flickr)