The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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February 24, 2005

Should We Even Look At The US Personal Saving Statistic?

Bernard Godement (who is much too kind) notes (in his comment on this post below) that Alex Taborrok and I spend a lot of time focusing on personal saving in our current Econoblog feature.  Are we missing something, he wonders, by not looking at private saving, which includes saving by businesses as well as households.

It's a good question.  Here's an answer in a picture.


Does the personal income trend give a false impression of private saving?  If you are asking questions about the general trend of the past two decades, the answer is no.  But if you are wringing your hands about the past three years in particular, then answer seems to be yes.

Of course, the issue with national saving (including the government component) remains, and the usual caveats about the NIPA measure of saving apply.

February 24, 2005 in This, That, and the Other | Permalink


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While you are looking at the difference between personal and business savings you also might want to look at how savings are used. Prior to 1980 personal savings was roughly equal to housing so personal savings was used to finance housing. Since 1980 it has fallen to insignificant levels. Business savings has almost always been greater then capital spending -- the exception is in the depths of a recession.

If this is true it raises the question of why should changes in personal tax rates have any impact on capital spending since personal savings does not play a significant role in financing capital spending?

Posted by: spencer | February 25, 2005 at 09:15 AM

During the late 1990s capital spending boom
business savings did only finance a little over 50% of business fixed investments. The remaining 40% of capital spending was financed by the federal surplus and foreign capital inflows. Private savings was much less then housing investment during this period so it still played an insignificant role.

Posted by: spencer | February 25, 2005 at 09:19 AM

Summing the two series in your graph gives a very interesting picture from the NIPA measure. The alternative measure is the increase per year in real net wealth - which is volatile but is also showing very little savings over the past 5 years.

Posted by: pgl | February 25, 2005 at 10:11 AM

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