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Let's start with a table and statements from the BEA's Personal Income and Outlays report. 

Personal Income and Outlays

Personal Income and Outlays aprl 2020


  • Current disposable income rose 12.9% to $18.66 trillion.
  • Current PCE fell 13.6% to $12.51 trillion.
  • Savings = $18.66 Trillion - $12.51 trillion = $6.15 trillion

The personal saving rate is savings as a percentage of disposable personal income.

Savings Rate = ($6.15 / $18.66) * 100 = 33.0%

Cobid-19 Disclaimer 

Covid-19 Impact on Income and Outlays

"The full economic effects of the  COVID-19 pandemic cannot be quantified in the personal income and outlays estimate for April because the impacts are generally embedded in source data and cannot be separately identified."

Eight Things Impacting Savings

  1. Stimulus checks
  2. Forbearance Plans
  3. BEA Disclaimer and Imputations
  4. Work-From-Home
  5. Stores Closed
  6. Price Drops
  7. Deferred Medical Spending
  8. No Vacations

Income Surges as Spending Drops Most on Record

Let's fill in additional details, some from my report earlier today Income Surges as Spending Drops Most on Record

1: Stimulus Checks: The government sent stimulus checks for $1,200. These are a one time play and the effect will roll off.  Check distribution was uneven. People received a check if they were below a certain income level whether or not they lost any income to Covid-19.

2: Forbearance Plans: Credit card companies, auto loan companies, rent companies, and mortgage companies all allowed consumers the right to skip payments if they requested. These amount will have to be made up later.

3: BEA Disclaimer: The BEA admits "impacts are generally embedded in source data and cannot be separately identified." That pertains to points one and two but there are also mortgage imputations as explained below.

4: Work-From-Home: Those working from home are not buying as much gasoline or eating out for lunch. 

5: Stores Closed: Restaurants, bars, and general merchandise stores are closed. Services such as barbers and beauty salons are also closed.

6: Price Drops: Prices generally moved lower. Gasoline, plane tickets, and rental cars are standouts. Also some insurance companies voluntarily dropped rates as people are driving less. 

7: Deferred Medical Spending: Elective medical and dental procedures  were halted.

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8: No Vacations: Obvious impacts on hotels, air travel, call rentals, restaurants.

Rent vs Mortgages

How did Mortgages Impact the Savings Rate?

Mortgage forbearance plans differ from credit cards, auto loans, and rent skip-a-pay plans. 

The BLS article CE and the PCE Comparison explains:

In CE publications, owner-occupied shelter  expenditures are defined to include mortgage interest and charges, property taxes, maintenance and repairs, insurance, and other related costs.

In contrast, the BEA defines the value of owner-occupied shelter for PCE as space rent, which excludes charges for utilities, major appliances, furniture, and furnishings.

The BEA has this blurb on the PCE Price Index which also ties back to the CPI.

The PCE market-based price index excludes most imputed expenditures, such as “financial services furnished without payment,” for which deflators are implicit, based on independent current dollar and chained-dollar estimates.

However, it includes “imputed rental of owner-occupied nonfarm housing,” which is deflated by the CPI for owner’s equivalent rent, so that the index will be comparable with the overall CPI. 

These articles imply that the BEA considers the imputed Owners' Equivalent Rent (OER) as a PCE expense but not the rest of the mortgage payment which is a capital expense and thus savings. 

If so, the amusing result is that the capital expense portion of the mortgage, whether skipped or paid, contributes to savings. 

However, the OER portion of the mortgage payment distorted savings upward (as did skipped rent, auto loan, credit card, and skipped payments in general).

In Regards to Point 3

Panic Sets In

Please recall Panic Sets In: Fed Promotes More Free Money

The Fed seldom mentions actions that Congress needs to take. Yet, we have back-to-back messages from Powell and Kashkari on the need for free more free money from Congress.

The Fed is very worried about skipped payments and the stock market both.

At Least for a While, It Pays Better to Be Unemployed

In regards to stimulus checks, At Least for a While, It Pays Better to Be Unemployed

Results will vary greatly.


A spending rebound is coming up, but it will not take things back to what they were before Covid-19 hit.