These days reports of a turbulent economy rising and falling hard are commonplace. Since the recession there has been fewer reports of improvement than downfalls. As the numbers roll in from the first, and soon second, quarters of this year it seems we aren’t doing as well as we hoped.
Ebb and Flow
Depending on who you ask, the state of the economy is either “getting better”, “about the same”, or “showing signs of decline again. While there have been some noteworthy improvement in the areas of job creation and unemployment claims, there is still much to be done. In a report from the Commerce Department, the gross domestic product shrank by 1% in the first quarter of 2014. This typically leads to a reduction in interest rates. Sounds good, right?
The problem with a shrinking GDP is that the types of interest rates that are often most affected are those on savings accounts, CDs, and money market accounts. Currently, these funds carry an interest rate of 0.10%. Compare that to the 2% inflation rate, illustrates that the money held in savings, CDs, and money market accounts are not growing as fast as the rate of inflation; essentially meaning they are shrinking in value instead of growing.
Application
While consumers have very little direct control over the state of the economy they can still take actions to help while also keeping their money safe. It has been determined that consumer confidence and retail spending do have some level of influence in the state of the economy. When people stop spending and hoard their money, the economy suffers. However, dealing with shrinking savings accounts or even financial hardship isn’t easy in a turbulent economy. Consumers can look for higher yield accounts to help their money grow or find safe investments in the stock market.