I am in the process of crunching the numbers from Monday’s report on U.S. personal income and outlays. The monthly data came out at 8:30 EST Monday morning but I think the quarterly data is more interesting because it goes back to 1947, where the monthly data only goes back to 1959. Here’s a chart I created from the quarterly series on the personal savings rate.
As you can see, the savings rate in America has fallen off a cliff starting just around 1982. It’s no coincidence that this coincides exactly with a secular bull market in both bonds and stocks. But, notice the surge in savings since the recession began. The rolling 4-quarter average rate hit an all-time low of 1.5% in Q1 2008 when the recession began. As of last quarter it had reached 4.6%. This increase of 3.1% in 7 quarters is without precedent.
Bottom line: we have witnessed an increase in the savings rate the likes of which we have never seen since data tracking began.
I will stop there regarding conclusions, but, if you know your sectoral balances models, then you know what the flip side of this has meant for government deficits. Will it continue? That is the question we are all grappling with. The (non-rolling) quarterly data peaked in Q2 2009 at 5.4%. So I suspect that we have seen the peak savings rate for this business cycle. So, while Americans were increasing savings through the recession, they are no longer doing so.
I will have more to say about the other aspects of the data later.