The Savings Rate

The US’s abysmally low personal savings rate has to start rising at some point. There’s no getting around that fact. But we clearly have not yet reached that point. Today’s release of the February personal income and spending data from the BEA shows no inclination for US households to start saving more.

Personal income increased $33.2 billion, or 0.3 percent, and disposable personal income (DPI) increased $29.6 billion, or 0.3 percent, in February, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $46.6 billion, or 0.5 percent.

…Personal saving — DPI less personal outlays — was $52.7 billion in February, compared with $71.6 billion in January. Personal saving as a percentage of disposable personal income was 0.6 percent in February, compared with 0.8 percent in January.

Other than the exceptional month of December 2004, when Microsoft paid out a massive dividend that sharply raised personal income for that month, the household saving rate in the US has not been above 1% of income in the past 8 months.

I fear that every month that this continues, my soft landing scenario (see below) becomes a bit more difficult to believe.