How Low Can It Go?

Apparently, February’s incredibly low savings rate was not the bottom for the US, because in March it went even lower. Since I’m in a charty kind of mood today, here’s the picture…

(Note: the bump at the end of 2004 is due to Microsoft’s one-time dividend payout in December.)

This incorporates the most recent data on personal income and spending, released this morning by the BEA, which showed that the household savings rate in the US was just 0.4% of household disposable income in March. That’s the lowest monthly savings rate since October 2001, when US consumers embarked on a patriotism-fueled spending spree to make up for a dearth of spending the month before.

This morning’s report also showed a substantial increase in income in March of 0.5% (though the increase was just enough to keep up with inflation), and an even more substantial increase in spending. With luck, strong income growth will continue in coming months and help erase some of the pessimism brought on by yesterday’s GDP report