If you watch CNBC these days, it seems that the economy is on a road to recovery and things will be looking pretty good in early 2010 or maybe even by the end of this year. It’s not that the housing market is hot hot hot or the unemployment rate is dropping, but these economic indicators and others are easing (not looking as bad as in Q1). And with the stock market (often seen as a leading indicator for the economy) up over 30% since its lows in March, it’s easy to start thinking good thoughts.

While I’m hoping for a recovery in early 2010, I think whatever recovery we might see will be muted. Basically, I’m not expecting to suddenly see GREAT numbers from retailers. OK numbers. Maybe GOOD numbers. But not great.

There really is a new reality in the US (and probably abroad). Consumers are scared. We’ve lost our jobs, our houses, and our savings. This combination means that Americans are saving again. While saving is good in a lot of ways (and I can hear my father’s sage advice not to live beyond my means), if we’re saving, we’re not spending. And if we’re not spending, retailers are not going to knock their top or bottom line numbers out of the park.

So pay attention to the personal savings rate which is now at 5.7%, the highest since 1995.