The American Savings Rate Is Dropping, and Experts Are Puzzled

Posted by Kendall Harmon

Scott Hoyt, an economist at Moody’s Analytics who specializes in consumer spending, said there were two competing hypotheses as to why the savings rate had dropped. “One is that consumers have just decided that they need to spend — they need to replace the car, the appliance, they want a new wardrobe.” The other, he said, is that the data, which is often revised months down the road, is simply incorrect.

“There have been several times where we spent a year or more talking about a negative savings rate” — meaning consumers spent more than they took in — “only to get benchmark revisions to the data,” Mr. Hoyt said. “The savings rate’s never been negative.”

Read it all.

Filed under: * Economics, Politics • Economy • Consumer/consumer spending • Housing/Real Estate Market • Labor/Labor Unions/Labor Market • Personal Finance • The Credit Freeze Crisis of Fall 2008/The Recession of 2007-- • * International News & Commentary • America/U.S.A.

4 Comments
Posted October 31, 2011 at 7:08 am [Printer Friendly] [Print w/ comments]



1. Emerson Champion wrote:

Might it be that clothing, food, shelter, and utilities are increasing in cost, and income is stagnant or dropping to the point that there is little left over after paying for clothing, food, shelter, and utilities?

October 31, 5:01 pm | [comment link]
2. Formerly Marion R. wrote:

Not really, no. Clothing and shelter are actually down for the year (this time last year chinese suppliers were manipulating cotton supply, and everyone knows what’s happened to real estate prices) and food and utilities are so volatile as to be almost meaningless in the calculation.  Moreover, the savings rate tends to self-normalize—even in the current environment savings returns tend to include inflation. Also, don’t forget savings includes stock ownership. Stocks over the quarter have been up noticeably.

If you read the article closely you will see experts are really pretty sure it is a frequently occuring statistical aberration that will not be there when additional data for the same period is available in January.  It’s an odd non-story.

October 31, 5:43 pm | [comment link]
3. Teatime2 wrote:

#1—I’m with you. Anyone who shops for groceries regularly has seen the rise in prices, particularly on essentials. And it’s a substantial rise, not just a nickel or dime, that’s been happening for at least a year now, probably more.

I rarely shop at Walmart but ran in there the other day because I needed a few things and was right near it. Wow. A brand of margarine I used to buy for $1.08 in the past year was $1.69. Milk was about $3.75/gallon for the Wally brand. Bread was about $1, and last time I bought Wally bread it was about 60 cents. And this is the place with the lowest prices in America, supposedly?

Wages haven’t gone up, many remain unemployed, some are newly laid-off. And they’re wondering why the savings rate declined? lol. Besides that, look at how tiny the interest rates for savings are! Unless you have a fortune, it’s almost not worth it. The tiny bit of interest earned would get eaten up by fees and taxes.

October 31, 6:37 pm | [comment link]
4. Tired of Hypocrisy wrote:

Interest rates are so low, and the markets are so volatile, it doesn’t make sense to save in that way. Here’s what the old-timers are saying: Keep enough cash to get by for a few weeks in a safe place—and that safe place is NOT in a bank.

November 1, 12:10 am | [comment link]
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