Monetary Policy

Personal Savings Still Falling, Still Being Praised for Rising

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Secretary of the Treasury Tim Geithner says Americans are starting "to save again, after a long period where people were not putting enough aside against the risk of a recession or a job loss." The Associated Press writes, "The U.S. is finally becoming a nation of savers," with a personal savings rate that is "nearly double that of a year ago." The Appleton, Wis. Post-Crescent reports both challenges and opportunities stemming from "the fact that Americans are saving more money today."

But data from the Bureau of Economic Analysis continue to show a decline in the rate of personal savings from the middle of the year:

 

Personal savings peaked in May and have been falling since.

These numbers, from yesterday's BEA report on personal income [pdf], are subject to substantial revision as quarterly and annual data become available. For example, the September rate that BEA now reports as 4.6 percent was initially reported as 3.3 percent. Rates for earlier months also change as new information comes in. There does not appear to be any way to account for these changes in real time (by, for example, estimating that the corrected figures usually move up or down at x percent). As a very helpful BEA statistician explained, "If we saw a consistent bias, we'd correct for it."

That having been said, to the extent that monthly changes in the personal savings rate tell us anything, they indicate the above consensus is wrong: Personal savings began to climb at the end of the Bush Administration, peaked in May, and have been generally falling since that time.