Consumers to Put Drag on Economy: Opinion

There is good reason to expect household savings rates will have to double, and maybe triple, to support the healing of consumer balance sheets. This process will take years, not months.

In hard numbers, it means going from saving roughly $150 billion a year to $400 billion to $500 billion a year. This assumes asset prices appreciate at a moderate pace over the next few years -- not something that is guaranteed given the pressures coming from Washington.

A shift of these proportions will not only impact the pace of the recovery, it also has implications on sectors of the economy.

Consumer-product companies are likely to face a more frugal consumer even as the recovery picks up speed. The recovery may not be the retail panacea some assume.

Additionally, the retirement-planning business may have never looked better. Now more than ever, there is a tremendous challenge and an opportunity for financial experts to help households navigate the waters and address their anxieties after a decade of underperformance.

And as we all know, Washington remains the most challenging wild card. Changes in tax and regulatory policy by Congress, high deficits absorbing higher personal savings, and future actions by the Fed are all question marks that may alter the operating environment.

We are on the front end of a recovery, but we shouldn't underestimate the depth of the recession's impact on consumer saving nor the consequences for the recovery.