We’re changing our old habits of borrowing

By JIM LANDERS

WASHINGTON — While stocks climb and retailers dream of a green Christmas, the U.S. economy that is slowly emerging from recession looks quite different from the one that fell over a cliff.

The binge of consumer borrowing and spending, hallmark of the 2007 economy, won’t be back any time soon. AlixPartners, a global consulting firm with offices in Dallas, issued a brief analysis recently showing the “new normal” for American consumer spending was off as much as 14 percent from its 2007 high.

That’s a $1 trillion decline.

AlixPartners warned Chinese exporters that they should pay more attention to Europe. Another sign of change was Burlington Northern Santa Fe Corp.’s decision last week to delay a South Dallas freight yard for several years.

“At some point in time, we think that we’ll have the need for an additional asset in southern Dallas,” Matthew Rose, BNSF’s chairman and chief executive, told my Dallas Morning News colleague Brendan Case.

“But this recession puts it out two or three more years. ...We had originally talked about 2012 to 2014, so I think it’s well beyond that,” Rose said.

Cash for clunkers

Federal stimulus for the summer’s Cash for Clunkers auto sales program and tax credits for homebuyers boosted spending in the third quarter, when the economy grew 3.5 percent.

This effort to jump-start the economy may fade. Consumers without jobs or worried about losing theirs aren’t big spenders.

Last Friday, the Federal Reserve reported that consumers in September borrowed less for the eighth straight month. Revolving credit, including credit cards, fell at a 13.3 percent rate and has now declined for a record 12 straight months.

Personal savings, meanwhile, increased to an annual rate of $355.6 billion, lifting the saving rate to 3.3 percent from 2.8 percent in August.

On the other side of the world, Chinese consumer confidence is high. Auto sales were brisk again in October, with year-to-date sales hitting 10.89 million vehicles. That’s likely to be more sales in 10 months than the U.S. market will see for the year.

Chinese real estate is also surging. A Hong Kong condominium sold last month for a price equal to $9,200 a square foot. That’s the equivalent of $23 million for a 2,500-square-foot home.

Meanwhile, China’s exports to the United States were off by $32 million in the first eight months of the year, a decline of 15 percent.

Consumer spending accounts for two-thirds of U.S. economic activity. Before the recession, it was coming near to 70 percent. So if consumers sit on their wallets going into the Christmas shopping season, there won’t be much to cheer about in the next numbers on economic growth.

Necessary transformation

But this is all part of what many economists view as a necessary transformation. We were far too accustomed to buying and borrowing. The Chinese were too used to selling and saving. We were linked together by China’s desire to lend its savings to the United States so we could keep on buying Chinese exports.

Perhaps the healthiest economic news of late was the unexpected jump in the Institute of Supply Management’s manufacturing purchasing manager’s index. This rise in manufacturing suggests the economy is growing in ways important to curbing our appetite for foreign credit and foreign goods.

X Jim Landers is a columnist for The Dallas Morning News. Distributed by McClatchy-Tribune Information Services.