Chart of the day: U.S. savings rate over last 60 years

I am in the process of crunching the numbers from today’s report on U.S. personal income and outlays. The monthly data came out at 8:30 EST this 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.

savings-rate-2009-q4-historical

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.

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.