This is one of those, ‘Be careful what you ask for’ situations. Economists, pundits and many others have been bemoaning our low personal savings rate for years. Now that the rate has soared, they should be happy, right? Apparently not. The savings rate is moving up sharply during a sluggish economic recovery and that means consumers are not spending those dollars.
If I wanted to be snarky and kid my friends in the media, I would say something like the savings rate ‘unexpectedly’ rose to 6.4%. Or, I could write that retailers are ‘bracing’ for a decline in spending as consumers decided to save their money. But, I won’t write anything like that. Too much of a cliche.
This chart from Calculated Risk shows the long-term trend in the rate of savings which had been heading down for decades. Now, it is on the way up.
Source: Calculated Risk
This chart shows the three-month average at a given point in time in order to smooth out all the squiggles. The red line is the savings rate, which is now just over 6%. The darker blue bars indicate recessions.
In the long run, the higher savings rate is good. In the short run, it should hold back economic growth a bit because folks are not spending those dollars on new stuff. This is a positive trend and I hope it continues.
For more information, see this MarketWatch report.