Personal Savings and the Savings Rate Continue to Crash From Stimulus Highs

June 1, 2022

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1:30 pm

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*Personal Savings from BEA, Real Savings is a Mish Calculation using a PCE 2012 Price Index of 100*

The BEA’s Personal Income and Outlays report for April shows the Personal saving was $815.3 billion in April and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.4 percent.

Real Disposable Personal Income (DPI) increased less than 0.1 percent in April but Real Personal Consumption Expenditures (PCE ) spending increased 0.7 percent.

Real wages did not keep up with spending.

Personal Savings Rate and Real Personal Savings Rate

*Personal Savings Rate from BEA, Real Savings Rates is a Mish Calculation using a PCE 2012 Price Index of 100*

Synopsis

Personal Savings: $815 Billion
Real Personal Savings: $672 Billion
Personal Savings Rate: 4.4 Percent
Real Personal Savings Rate: 3.6 Percent

These numbers would look much worse if adjusted by the CPI rather than the PCE price index.

Inflation Four Ways

PCE and Core PCE from the BEA, CPI and Core CPI from the BLS.

For discussion of the above chart, please see CPI Year-Over-Year Drops a Bit, But Is it Believable?

For the latest housing adjusted CPI, please see Case-Shiller Home Prices Reach New Record High, But This is Rear View Mirror Look

Savings are by he high wage earners. The bottom end has fallen back in love with credit cards.

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Tony Bennett

1 year ago

Circle next Tuesday.

Federal Reserve releases Consumer Credit (April) … prior 2 were blowouts … and with April retail sales above expectation … another humdinger (likely).

How much longer can Consumer hold onto the ledge with tanking savings and maxing credit??

Lisa_Hooker

1 year ago

Reply to Tony Bennett

The ledge is fine. Just as long as you don’t look down.

Doug78

1 year ago

The saving rate is crashing because those that have savings are using them to buy tangible assets because they are afraid that inflation will render their savings worthless. Most of it went into real estate at historically record prices. Some went into actual thing as opposed to services. Most f all there is still a lot of savings built up when people could work and get paid but couldn’t buy anything. On top of it the government checks when out to everybody so in all even if the savings rate has fallen the total amount of saving is still at incredibly high levels. That money is no longer going into real estate, the stock market, commodities nor cryptos because they are all decreasing or risk in price. For the moment it is just sitting there. My guess is that much of that money money is waiting for decent bond yields like we had before the Fed went off the tracks. Wouldn’t it be nice to get back to rate levels that are historically normal and advantageous for the economy as a whole?

Tony Bennett

1 year ago

Reply to Doug78

“The saving rate is crashing because those that have savings are using them to buy tangible assets because they are afraid that inflation will render their savings worthless.”

…

Fiscal stimulus waning + end of loan forbearance / rent moratorium + inflation = sucking every last penny of households to make ends meet.

Bloomberg today had an article that 1/3 of households making at least $250K annually (threshold for top 5%) living paycheck to paycheck.

Doug78

1 year ago

Reply to Tony Bennett

The other 2/3 of households are still packing it away. There are always people who make good money and who still seem to not be able to save money. Having a high-paying job doesn’t mean you are fiscally responsible. Look at Hunter.

Tony Bennett

1 year ago

Reply to Doug78

You need to get out of your million dollar neighborhood more often.

Folks are suffering.

Lisa_Hooker

1 year ago

Reply to Tony Bennett

But suffering is relative.

Doug78

1 year ago

Reply to Tony Bennett

If Bloomberg said that 1/3 of those making $250k and above are living from paycheck to paycheck then by basic math 2/3 are not living from paycheck to paycheck and are are saving part of what they make. It has less to do with how much you make and more to do with how you manage what you make. We have all seen the type of person who makes good money but burns through it spending on whatever comes to their head. Others who make the same amount are careful spenders. Guess which one ends up living in a million dollar neighborhood. I have much more sympathy for those who make much less than those making $250k and who can’t save because they don’t have the resources. They are the ones suffering. A dumb*ss who is making $250k and cries about not being able to save any money I have no sympathy for because he has the resources but doesn’t use them wisely.

Christoball

1 year ago

I think many people are saving a buffer and affording it by putting things on credit cards. This is especially true with 0% promotional 12 month financing schemes. It is a beautiful system as it temporarily mimics the Feds promotional financing to banks. The difference is that banks never run out of promotional financing but people do. Just wait until 9-12 months from now when promotions run out. All of these ideas make the effectual savings rate even lower than the Real Savings Rate. For many net worth is starting to decrease at an even faster rate.

Casual_Observer2020

1 year ago

Literally just liquidated all my vested RSUs and ESPP. I don’t expect to survive this recession as an almost 50 year old. I think the recession will be here sooner than we think and last longer than most think. It was funny watching CNN this morning trying to justify Fed policy errors in 2021 and then say they are doing the right thing while pointing out Larry Summers warned of inflation and policy errors last year. They were complementary of Yellen for saying she was wrong.

How come we can’t find the likes of Mish somewhere in the mainstream media ?

Doug78

1 year ago

Reply to Casual_Observer2020

“How come we can’t find the likes of Mish somewhere in the mainstream media ?” It’s because the criteria for being on mainstream media is not good ideas and accuracy. The entertainment aspect is much more important in mainstream media. If Mish wore weird glasses, dyed his hair pink and spoke in a distinctive way then his predictions wouldn’t matter to his remuneration but his media personality would. I remember my company employed a noted economist to talk to clients. He was an amazing personality with an infectious enthusiasm that the clients loved. Unfortunately his predictions were almost always wrong. When I privately pointed that out the clients agreed and never followed his recommendations but they told me that they spend 14 hours a day looking at screens and that any excuse to take a break and have fun on company time was well worth it. They kept asking him back for his entertainment value which was considerable.

Lisa_Hooker

1 year ago

Reply to Doug78

Did they serve refreshments at his talks?

Doug78

1 year ago

Reply to Lisa_Hooker

Of course! Presentations with a very small group of people who control lots of money always entails the best of all that stuff.

Maximus_Minimus

1 year ago

Reply to Doug78

There are clowns like that who are not even economists. They’re promotional speakers hired by companies to supposedly generate group cohesion. After having been through a few, I can say for probably the majority of participants, the best feature is when you survive without a permanent damage to your personality.

Doug78

1 year ago

Reply to Maximus_Minimus

I have been through a few of the “team building” sessions early on in my career. At best they are boring. At worst they degenerate into parties that give you ample opportunity to make a fool of yourself in front of your colleagues and bosses.

Casual_Observer2020

1 year ago

Reply to Doug78

You must not see the boring economists they have on CNN and elsewhere. A Mish segment would be way more entertaining. I think the media only looks for minted economists who’ve never worked at a private sector job and usually park themselves at some institution like the Fed or university as a professor.

Doug78

1 year ago

Reply to Casual_Observer2020

I don’t watch CNN so I can’t judge their economists. It’s not surprising that they are boring since CNN’s sees their true calling in political news and not economic news. Can’t have an economist outshining the political stars so they are chosen to be wallpaper. It’s marketing.

jiminy

1 year ago

Reply to Doug78

The economist as clown. Interesting!

KidHorn

1 year ago

Reply to Casual_Observer2020

So, you’re one of the few who still watch CNN. CNN is no longer a news organization. They’re a propaganda arm of the DNC.

Casual_Observer2020

1 year ago

Reply to KidHorn

I switch between all sources of news including Fox, CNN, MSNBC, Bloomberg and others. They are all propaganda arms of the same body which has a pendulum that won’t stop. There aren’t any sources of media that aren’t corrupted which is why I like this blog the most when it comes to the economy. You can actually see the Grand Canyon sized divide between actual economic news here and elsewhere the longer this economic cycle goes on.

MPO45

1 year ago

While savings has “crashed” it also looks like it is normalizing against the trend in the graph. It makes me wonder if this is the nature of economics. People get thrown a “bone” in the form of free money, that money gets saved but then inflation quickly takes it away. Clearly the most prudent thing to do in high inflation periods is to earn more money or buy assets that appreciate in high inflationary times. Savings doesn’t help.

TechLover1

1 year ago

Reply to MPO45

I love your analysis. In the monetary and fiscal world we live, if you actually have discretionary income, you should own assets that appreciate in the current and likely future scenarios. Saving cash/money is for losers. One should have about six months of expenses in a liquid account but the rest should generally be invested in a diversified portfolio.

Tony Bennett

1 year ago

Reply to TechLover1

“Saving cash/money is for losers.”

…

Au Contraire.

I’ll be picking up (currently leveraged) assets for pennies on the dollar soon enough.

Esclaro

1 year ago

Reply to MPO45

One might think that in an inflationary environment, precious metals and the companies which mine them would do very well. Instead they have done worse than putting your money in a mattress. Precious metals are down and the mining company stocks have been annihilated.

MPO45

1 year ago

Reply to Esclaro

The problem for miners is that mining is energy intensive. Those mining rigs use a whole lot of diesel fuel then you need to transport those materials (more fuel) then you need to refine those materials (more energy!) then you need to get it to its final destination where more energy is needed to make it into something useful (more energy). Mining is great when fuels are cheap and demand is high for goods. It’s lose-lose for miners right now unless you are well diversified.

I cautioned people here to stay away from any business model that is heavily reliant on energy, especially fuels (airlines, cruise lines, shipping, transportation of any kind, etc).

Esclaro

1 year ago

Reply to MPO45

That makes sense for companies mining everything but gold. The gold bar is the finished product and it takes little energy to transport. For the actual process of mining and refining, I can see how increased energy costs would affect them. Nevertheless they are making a ton of money and these days, people hate companies that actually make money!

Scooot

1 year ago

Reply to Esclaro

I bet mattress prices have gone up. 🙂

Bam_Man

1 year ago

Why would anyone have even the slightest inclination to “save” in this environment (assuming they have the ability to)?

Inflation is 9+% and the average “High-Yield Savings” APY on Bankrate.com is 0.80%.

It is an “in-your-face” losing proposition.

A 50bps (or less) increase every six weeks does nothing to change this.

PapaDave

1 year ago

Reply to Bam_Man

Agree. Instead of saving your money, waiting for the next crash, employ it in areas that are benefiting from the high prices. Instead of complaining about high prices, figure out how to profit from them.

Casual_Observer2020

1 year ago

Reply to PapaDave

Let’s put all the money in inflation sensitive businesses and see what happens. I really can’t see this economy surviving $5-6 gasoline. It’s hit $7 in several places in California. The trajectory of these prices isn’t sustainable imo.

PapaDave

1 year ago

Reply to Casual_Observer2020

No. It is unwise to put all your money into any single investment idea. I only have 50% in oil stocks. Are you 100% in cash?

Casual_Observer2020

1 year ago

Reply to PapaDave

I am well diversified and sleep well at night. More like the tortoise than the hare.

Tony Bennett

1 year ago

Reply to PapaDave

If you are trader, fair enough. I’m not.

PapaDave

1 year ago

Reply to Tony Bennett

I am a trader, and I am taking advantage of all the volatility. But I also have a core position, which is presently sitting over 50% in oil stocks, which are up over 50% in value year-to-date, and which were also up over 100% last year. I got all the original info that I used to buy oil stocks from this blog. It was there for all to see. But apparently, not many took advantage. But as I often say, that’s what makes a market. Differences of opinion.

MPO45

1 year ago

Reply to Bam_Man

I try to keep an emergency cash fund of 100k in very liquid instruments including boring old savings accounts. With a sudden job loss, medical emergency (for myself or family members) or other black swans you never know. Having said all that, I don’t expect to get rich earning 1% in interest but more of peace of mind.

PapaDave

1 year ago

Reply to MPO45

Agree. It is always prudent to have 2-10% in cash. You need it when opportunities or emergencies arise.

Lisa_Hooker

1 year ago

Reply to PapaDave

Me too. But $20 doesn’t buy what it used to.

PapaDave

1 year ago

Reply to Lisa_Hooker

🙂

KidHorn

1 year ago

Reply to Bam_Man

Sometimes return of capital is more important than return on capital.

PapaDave

1 year ago

Reply to KidHorn

Does that mean that you are all in cash, as you wait for the big crash? How are you presently invested? I am always interested in hearing the investment ideas of as many people as possible. Sometimes they let you in on a gem you were unaware of.

KidHorn

1 year ago

Reply to PapaDave

I have a lot of cash, but not all. I think precious metals are the best investment now. I’m usually right in my investments, but sometimes it takes a very long time to pan out. I own a lot of bank stocks because they will be the last to fail. Just before the government. They also pay a good dividend. I invest in tech off and on, but only if I see something that seems absurdly low priced. For example I recently bought AMD for under $10. it went up over $100 within about a year. I sold shares along the way, so I didn’t reap 10x return. But I still made out very well. I’ve sold it all now.

PapaDave

1 year ago

Reply to KidHorn

I also hold banks and utilities in my other 50%. Steady dividend payers. It helps to balance out 50% in growth areas. I also exited tech stocks a bit early. And I will probably exit my oils a little early. But I think that oil stocks have a long way to go, based on their incredibly low valuations.

Casual_Observer2020

1 year ago

Reply to KidHorn

AMD was last ~$10 in June of 2017. It didn’t hit $100 until July of 2021. That is not a year by my calculation.

KidHorn

1 year ago

Reply to Casual_Observer2020

My time frame is probably off. I bought it at like $9.90 and sold my last at around $100. Maybe it was over a few years. I remember selling a big chunk when it hit $16. I thought 60% is pretty good and I’ll buy more when it dips back down. But it never dipped back down.

Lisa_Hooker

1 year ago

Reply to PapaDave

I buy oil wells. Some by myself, some with a few partners.

PapaDave

1 year ago

Reply to Lisa_Hooker

Do you ever run into problems with well decommissioning costs, and environmental cleanup costs?

Lisa_Hooker

1 year ago

Reply to PapaDave

Not yet, and I anticipate selling wells before they are exhausted. You trade stocks, I trade wells. Environmental issues means being careful and aware of well condition (I have an adequate emergency fund). If need be, shutting in a small stripper well is straightforward and much less expensive than these multi-well fracking wells are going to be.

PapaDave

1 year ago

Reply to Lisa_Hooker

Very interesting. You are a great example of “there are always opportunities out there”. I like it!

Christoball

1 year ago

Reply to KidHorn

Yes all indexes are down. Only oil is up because of the war, and people who feel they have to put money somewhere else other than cash to combat inflation. Even though oil was a good investment in 2Q 2020, so where many other things as well. Oil kept going after the other indexes declines; but this trend will not go on forever.

The Worlds 242 Largest oil and gas companies by market cap is only $6.901 T. The Earth has a GDP of 84 trillion of which the USA is 21 trillion of that. Oil cannot shoulder the worlds economy but oil rests on the shoulders of the worlds economy.

link to companiesmarketcap.com

PapaDave

1 year ago

Reply to Christoball

So, have you sold everything except your oil stocks? Or are you all in cash and gold like some here?

Christoball

1 year ago

Reply to PapaDave

I never bought oil stocks. I bought other profitable things at the time and sold them. I am in cash and tangibles. I would never buy into oil stocks at the current levels. I missed the oil war boom but feel ok with not profiting off of other people misery.

Oil is not the only game in town. As a wise man told me: “If everyone liked the same girl, she would be busy”

PapaDave

1 year ago

Reply to Christoball

I am 50% in oil stocks. Never bet everything on one idea. Regarding current oil stock valuations, they have been getting cheaper and cheaper as oil prices have gone up and they have paid down or eliminated their debt. What’s not to like about stocks with 25%+ free cash flow and EV/CF values between 1 and 3. Particularly when they traditionally trade at EV/CF of 6 to 8. Looks like an easy double from here. And that’s assuming oil is at $100.

radar

1 year ago

Reply to Christoball

All profits come from misery as someone has to work for them.

PapaDave

1 year ago

Reply to Christoball

If you are trying to make me feel guilty for owning oil stocks, forget it. It just sounds like sour grapes. I bought oils more than a year before Russia invaded Ukraine. All the invasion did was enhance an already surging sector.

Tony Bennett

1 year ago

Reply to KidHorn

A Voice of Reason.

Thank you

Casual_Observer2020

1 year ago

Reply to Bam_Man

Because asset values will also decline. Also some may need the money after they start losing job their job.

RonJ

1 year ago

“Savings are by he high wage earners. The bottom end has fallen back in love with credit cards.”

Is it love or desperation?

Maximus_Minimus

1 year ago

Reply to RonJ

I am always worried how are owners of gas-guzzlers speeding past me doing with their personal savings rate?

Dr_Novaxx

1 year ago

Money freely given flows through your fingers like sand. The entire concept of Basic Universal Income is based on the false premise that people are poor because they don’t have enough money, but lack of money is just a symptom. As in modern medicine, it’s much easier to treat the symptoms than it is to cure the disease, but our focus must always be on curing the disease.

“Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.”

RonJ

1 year ago

Reply to Dr_Novaxx

“The entire concept of Basic Universal Income is based on the false
premise that people are poor because they don’t have enough money, but
lack of money is just a symptom.”

“The California State Senate passed SB 1341 which would establish the California Success, Opportunity, and Academic Resilience (CalSOAR) program to provide guaranteed income to 15,000 eligible
homeless graduating high school seniors beginning with the Class of
2023. The bill now moves to the General Assembly for consideration.”

RonJ

1 year ago

Reply to RonJ

link to californiaglobe.com

“The City recognizes that artists and creative workers have experienced
significant economic instability, particularly during the COVID-19
pandemic,” said Cultural and Creative Economy Manager Megan Van Voorhis.
“We are interested in exploring different solidarity-economy concepts
that address that instability, along with systemic racism and inequity,
to support Sacramento’s creative workers.”

Dr_Novaxx

1 year ago

Reply to RonJ

Wow, how sad, that will only make things worse for everyone.

Let’s remember the admonition from the Apostle Paul “…if any would not work, neither should he eat.”

— 2 Thessalonians 3:10

Zardoz

1 year ago

Reply to Dr_Novaxx

Work or die is slavery with an extra step.

radar

1 year ago

Reply to Zardoz

Someone has to work, nothing is free.

Lisa_Hooker

1 year ago

Reply to radar

Not true.

You could be elected as a politician.

Dr_Novaxx

1 year ago

Reply to Zardoz

So then, work is a form a slavery now? What are they teaching kids these days?

Also I should note that giving out money to people is inflationary, but giving without receiving anything productive in return is inflationary on steroids.

Lisa_Hooker

1 year ago

Reply to RonJ

Ah, so the important job to have is working for the State and deciding who is a creative worker and who is not.

Lisa_Hooker

1 year ago

Reply to Dr_Novaxx

Give a man a fish and you feed him for a day.

Teach a man to fish and he will have to buy a line and fishhooks, bait, perhaps a pole, and most importantly a license from the government permitting him to fish for a certain period of time and only in certain places.

radar

1 year ago

Reply to Lisa_Hooker

That’s what banks are for. Hopefully he can sell a fish or two to pay back the bank. Probably doable if he puts in the time.

RunnerDan

1 year ago

Reply to radar

The banks are lending to many untalented fishermen causing the price of poles to skyrocket. When the untalented finally walk away from their loan, the banks get bailed out. The real loser is the talented business who had to take out the loan to buy the overpriced pole.

Rinse and repeat for housing, education, etc.

Gordofeo

1 year ago

Does personal savings include the amount of equity and asset wealth won over the past few years….I’m sure it looks much better if it does not include stocks and other asset savings.

Mish

1 year ago

Reply to Gordofeo

It does not include assets

But the bottom 70% or so have no assets

PreCambrian

1 year ago

I am not sure how a percentage (real savings rate) is adjusted for inflation. One would think that the savings rate would be savings/income (savings divided by income). Both the numerator and the denominator would be adjusted by the same PCE or CPI value so the percentage would remain the same. Perhaps the definition is different.

KidHorn

1 year ago

Reply to PreCambrian

The personal savings rate is exactly what you proposed. Savings/income. The thing is, both savings and income are educated guesses and not actually measured. So like almost all economic numbers, take it with a grain of salt.

Personal Savings and the Savings Rate Continue to Crash From Stimulus Highs

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