U.S. Savings Rate Soars to 33%

The day after the GDP report, we get reports on personal income and spending. This time was an odd one. For April, personal income rose by 10.5% while personal spending decreased by 13.6%. The lockdown has screwed with even boring economic stats. The savings rate soared to 33% as Americans are stockpiling cash.

The personal savings rate hit a historic 33% in April, the U.S. Bureau of Economic Analysis said Friday. This rate — how much people save as a percentage of their disposable income — is by far the highest since the department started tracking in the 1960s. April’s mark is up from 12.7% in March.

The swiftness and severity of a U.S. economic recovery hinges on whether consumers continue to stockpile cash or start to spend again.

“There is a tremendous uncertainty and virus fear that is lingering, and that is restraining people’s desire to go out and spend as they normally would,” said Gregory Daco, chief U.S. economist at Oxford Economics.

The previous record savings rate was 17.3% in May 1975, according to FactSet. The savings rate was elevated above 13% throughout most of the early 1970s. The increase in savings came as spending declined by a record 13.6% in April.

The stock market was doing well yesterday but dropped in the afternoon. The trend is continuing into today’s market. Traders could be nervous ahead of President Trump’s comments on China at today’s news conference.  

Posted by on May 29th, 2020 at 10:54 am


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