Daily Spotlight: Savings’ Grace

Summary

We feel more comfortable about consumers’ ability to sustain economic growth based on an upward revision to the personal savings rate. Every year, the Bureau of Economic Analysis (BEA) updates recent years’ data with more-complete and more-detailed information from sources such as the Statistics of Income data from the Internal Revenue Service. Last month’s revisions to the National Economic Accounts go back to 2019. We had been concerned that consumers were stretching budgets and might be running out of steam. Indeed, many are strained based on what we are hearing from big retailers — but in aggregate, the revised data show that consumers are in better shape than we expected. The chart below shows the monthly personal savings rate based on the previous data and on the new, revised data. For 2024 through July, the savings rate had averaged 3.4% under the old data and 5.2% under the new data. While the former numbers were of concern, the revised savings rate is close to the average of 5.7% since 2000. The median, or middle, value since 2002 is 5.4%. Which numbers were revised higher to lift the savings rate? Personal income was raised (primarily as a result of stronger interest and dividend income) as was business income. Personal saving is what is left over after households pay their taxes and bills. The savings rate represents savings as a percentage of disposable (after-tax) income. The policy implications of additional strength in the economy’s

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