Zero. Zip. Nada.

The US personal savings rate fell to zero in June – its lowest level since the latest spending binge started (post 9/11) and the 2^nd lowest since the Great Depression. You can read the full government report here (be sure to check out some of the tables – very interesting information). 

Yes, the economy grew at a healthy annualized rate and clearly the Fed is still worried about inflationary pressure (we still have 50-100 basis points left to move in the fed funds rate) . But still – personal savings rate of 0%? We already lag behind the rest of the world in our ability not to spend pretty much all of what we earn (see here for a chart of US savings rates by quarter for the past 5 years) , and this trend shows no sign of improving.

I don’t get why these sorts of data don’t get more press.  It seems that yesterday’s announcement received little, if any, attention at all.  But our inability to save is a serious problem. Combined with deficit spending and our trade imbalance we’re increasingly reliant on outside capital to finance our collective lifestyle.  Ultimately these trends are not sustainable.

I don’t get why so few people seem to care . . .

Comments

[Ross Carlson]

People are stupid. Period. I love new toys and to spend as much as the next guy but I also (well maybe my wife) know how to save. I agree that it's scary that this doesn't get press, I think they media doesn't want it to get press, they want consumers to spend. They want ad revenues to go up. Liberals want people to spend and liberals run the major media (ok that was a shamless ploy to piss Seth off.....)

[Ben Casnocha]

I don't get a lot of things, and I think Ross summed it up well: people are stupid, period. There's so much irrational behavior in this world that I've given up, for most things, trying to figure out why people (me included) do the stupidest things. And I'm not just talking about finance - this has more to do with education than anything else - but all aspects of human behavior. Its perplexity is fascinating.

[Charlie Wood]

Seth,

Congratulations! You've made it onto Bubble 2.0, the blog that can't decide on exuberance or schadenfreude.

http://bubble20.blogspot.com/

-Charlie
:-)

[Jack Krupansky]

1) The personal savings rate was 0.02%, not 0%. There was some rounding.
2) It *never* makes sense to get excited or depressed by a single data point in a series. I'd just at least three consecutive months and even then look at a mobing average.
3) This data is "seasonally adjusted", which works sometimes and not other times. There are lots of seasonal effects and they don't always play out the same way.

Just to put the numbers in perspective: disposable personal income in June (seasonally adjusted) was $9.0553 trillion and personal outlays were $9.0534 trillion, a difference of $1.9 billion, the net savings.

My advice to everybody: wait another two months before getting excited (or depressed) by any of these numbers.

Meanwhile, if you want to do something useful, write letters to your elected officials demanding that they investigate the extreme extent to which "investment funds" are speculating in commodities, particularly crude oil.

-- Jack Krupansky

[jeff]

savings alone, as in physical capital, just isn't a growth engine for a wealth producing economy. Europe has, on average, a 20% savings rate yet no meaningful growth and double digit unemployment. Japan has historically high savings rates and that was a significant factor in their stagnant economic environment for the last decade.

The other issue is that statistics rely on inflexible definitions of what something is or isn't. For example, the U.S. is currently in a period of record high home ownerships levels (and record low foreclosures) yet home equity is not a factor in savings rates. My parents, who have built up the equity in their home over the last 30 years would beg to differ.

Americans also put more into R&D and education, things to do matter to long term economic performance, than any other developed economy. This is sometimes referred to as the hidden savings rate and represents an investment in future performance as opposed to an accumulation of physical capital.

Using one statistic in a vacuum just isn't going to provide much of a performance metric for a system as complex as a modern economy. Sure I think that encouraging people to save more is a good thing, but I'm also conscious of the fact that a fiscal and monetary policy that prioritizes personal savings may have unintended consequences that are far worse than low savings rates today.

[Sean]

I couldn't agree more.