Sunday, February 28, 2010

What is the U.S. Personal Savings Rate?

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Disposable personal income is the amount of income left over after taxes have been paid.  Personal savings is the amount of income left over after personal consumption expenditures and debts have been paid.  The personal savings rate is the ratio of personal savings to disposable personal income.  The U.S. Department of Commerce's Bureau of Economic Analysis has kept a record of the personal savings rate since 1959.  Since then, the personal savings rate has averaged 6.98% with a standard deviation of 2.75%.  In the past 20 years, Americans have saved at a much lower 4.18%.
The Federal Reserve Bank of St. Louis and the Federal Reserve Bank of Kansas City both have interesting articles that compare the U.S. personal savings rate to that of other countries (notably Germany and Japan).

To tie things in with CPI inflation data, below is a plot showing the annual inflation rate vs the personal savings rate.

Copyright © 2010 Peter Dolph