U.S. Savings Rate Lowest Since October 2008
Today's U.S. economic releases were basically consistent with the bearish pattern I reported about last week.
While the ISM manufacturing index showed continued expansion in February, it was at a slower pace than the previous month. Meanwhile, construction spending fell in January.
While consumer spending rose, real disposable income fell both including and excluding tax & transfer payment changes. As a result, the savings rate fell to 3.3%, the lowest since October 2008. The savings rate is down from 5.4% during the second quarter of 2009.
This drop in the savings rate is likely primarily the result of the wealth effect created by higher house- and stock prices, as well as negative real interest rates. The low and falling savings rate will limit the ability of households to increase spending further.
While the ISM manufacturing index showed continued expansion in February, it was at a slower pace than the previous month. Meanwhile, construction spending fell in January.
While consumer spending rose, real disposable income fell both including and excluding tax & transfer payment changes. As a result, the savings rate fell to 3.3%, the lowest since October 2008. The savings rate is down from 5.4% during the second quarter of 2009.
This drop in the savings rate is likely primarily the result of the wealth effect created by higher house- and stock prices, as well as negative real interest rates. The low and falling savings rate will limit the ability of households to increase spending further.
<< Home