[copious.abundance]

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Americans saving more, spending less
By MARTIN CRUTSINGER – 3 hours ago

WASHINGTON (AP) — Americans are hunkering down and saving more. For a recession-battered economy, it couldn't be happening at a worse time.

Economists call it the "paradox of thrift." What's good for individuals — spending less, saving more — is bad for the economy when everyone does it.

On Friday, the government reported Americans' savings rate, as a percentage of after-tax incomes, rose to 2.9 percent in the last three months of 2008. That's up sharply from 1.2 percent in the third quarter and less than 1 percent a year ago.

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[eXpat]

Too late people, dinner is served

[sittinguy]

Is it saving,, or keeping their heads above water?

Its over for most, they just don't know it yet.

[copious.abundance]

BTW here's the chart from the BEA, out today:


Source

[vision-master]

Americans [s]saving[/s] working for less [s]more[/s], therefore spending less

[Specop_007]

Is it saving,, or keeping their heads above water?

Its over for most, they just don't know it yet.

Couldnt be keeping heads above water, if that was the case they wouldnt even be saving they would be spending on basic necessities. Seems to me people are cutting discretionary spending. They are returning to a far more preferable mode of spending "If I dont need it, I dont think I'll buy it".

Practicality returns, but at what cost?

[Arsenal]

People have it reversed. They should save during the boom and have a nice cushion to dip into during the hard times.. Oh well. People learned after GD1 and it took a couple of generations for us to forget again.

[TheDude]

Sage advice from Saturday Night Live - Don't Buy Stuff.

[Blacksmith]

The expression "Too little, too late" comes to mind.

[copious.abundance]

Savings rate is now up to 5%, highest in 14 years.
Marketwatch

[DarkDawg]

Is it saving,, or keeping their heads above water?

Or, you might call it "financial water-boarding."

[lowem]

Is it saving,, or keeping their heads above water?

Or, you might call it "financial water-boarding."

Yeah, the ultimate reality show - "Save, Swim or Sink".

[Blacksmith]

If you save your money will inflation not take most of it?

[the48thronin]

looking at the chart in the original post makes me doubt the validity of the model producing the chart look at third quarter 2001......

The fuel prices had spiked, thousands of trucking companies ( including mine) turned in trucks ( 8 for us) and filed chapter 7 . In fact the number of bankruptcies was a then record high only eclipsed in the last 2 quarters...HMMM bad modeling seems a more likely answer than planned deceit.

The events of September 11th didn't promote savings... My workers comp costs doubled ( backdated to the first of the year somehow), my liability insurance went up 25%. I really doubt the existence of a spike in percentage personal savings that quarter.

They say figures never lie but liars sure can figure.. My brother the statistician says "numbers will tell you anything if you torture them long enough."

[copious.abundance]

looking at the chart in the original post makes me doubt the validity of the model producing the chart look at third quarter 2001......

The fuel prices had spiked, thousands of trucking companies ( including mine) turned in trucks ( 8 for us) and filed chapter 7 . In fact the number of bankruptcies was a then record high only eclipsed in the last 2 quarters...HMMM bad modeling seems a more likely answer than planned deceit.

The events of September 11th didn't promote savings... My workers comp costs doubled ( backdated to the first of the year somehow), my liability insurance went up 25%. I really doubt the existence of a spike in percentage personal savings that quarter.

They say figures never lie but liars sure can figure.. My brother the statistician says "numbers will tell you anything if you torture them long enough."

Actually it makes more sense if you think it through a little more. During a recession people spend less and put away more of whatever disposable income they have to prepare for the apparent bad times ahead. You see this happen in every recession.


Link

Notice that the savings rate spiked in ~1973-75 (recession), ~1980-84 (recession), ~1990-93 (recession), again in 2001 (recession) and again starting last year (recession). It seems counter-intuitive at first glance, but it's true.

[the48thronin]

I think the original headline post and the chart are talking apples and oranges.


Saving more after taxes and percentage of disposable income are two different things entirely.

Look at the reality of a situation... If a man has 10$ a week in disposable income ( note not after tax income, but disposable income as in bea chart) and saves 1 dollar a week his percentage is 10%.
He saved 1 dollar.

If the same man under pressure of rising costs ( 2001 insurance etc and fuel spike,) last year fuel spike.. and his disposable income drops to 10 cents... but he saves a nickle... he has saved 50% but only 5 cents.

Numbers will say anything if you torture them long enough.. If you use a chart model for one thing, but print a story saying something entirely different... The word for that is propaganda... ( polite for big lie!)

On Friday, the government reported Americans' savings rate, as a percentage of after-tax incomes, rose to 2.9 percent in the last three months of 2008. That's up sharply from 1.2 percent in the third quarter and less than 1 percent a year ago.

[Serial_Worrier]

Is it saving,, or keeping their heads above water?

Its over for most, they just don't know it yet.

Couldnt be keeping heads above water, if that was the case they wouldnt even be saving they would be spending on basic necessities. Seems to me people are cutting discretionary spending. They are returning to a far more preferable mode of spending "If I dont need it, I dont think I'll buy it".

Practicality returns, but at what cost?

Heck, I've done it myself so far this year. I told myself no books, music or DVDs until April 1st. I've held to that.

the48thronin - you know what they say. Lies, damn lies and statistics.

[copious.abundance]

I think the original headline post and the chart are talking apples and oranges.


Saving more after taxes and percentage of disposable income are two different things entirely.

Look at the reality of a situation... If a man has 10$ a week in disposable income ( note not after tax income, but disposable income as in bea chart) and saves 1 dollar a week his percentage is 10%.
He saved 1 dollar.

If the same man under pressure of rising costs ( 2001 insurance etc and fuel spike,) last year fuel spike.. and his disposable income drops to 10 cents... but he saves a nickle... he has saved 50% but only 5 cents.

Numbers will say anything if you torture them long enough.. If you use a chart model for one thing, but print a story saying something entirely different... The word for that is propaganda... ( polite for big lie!)

As long as the data is being reported consistently, if nothing else it shows a trend.

That said, if you look at data for actual savings deposits in banks, you'll notice that those have, in fact, ticked up the past few months.


Source

Notice the uptick at the end starting in late 2008. If you look at the monhtly data page and go to the very bottom you'll notice some large percentage increases in December and January.

So the numbers reported in the OP seem consistent with this other data set.

[the48thronin]

As long as the data is being reported consistently, if nothing else it shows a trend.

That said, if you look at data for actual savings deposits in banks, you'll notice that those have, in fact, ticked up the past few months.


Source

Notice the uptick at the end starting in late 2008. If you look at the monhtly data page and go to the very bottom you'll notice some large percentage increases in December and January.

So the numbers reported in the OP seem consistent with this other data set.

Yes but lets see a comparison of deposits to savings accounts FDIC insured and withdrawl from 401 and other funds... Shifting money to a perceived more secure location or more liquid asset could explain all that uptick while still savings might be decreasing...

the48thronin - you know what they say. Lies, damn lies and statistics.

numbers will say anything... if you ignore the other numbers saying different things... You of course have the short version correct....

[copious.abundance]

>>> Business Week <<<

April 2, 2009
Bigger U.S. Savings Than Official Stats Suggest
A closer look at BEA numbers shows that Americans reduced spending by 3.1% in the past year, indicating that the savings rate has risen to 6.4%
By Michael Mandel

How much have Americans cut back?

On the face of it, not much. The official data from the Bureau of Economic Analysis say that in February personal spending was down 0.4%, or $40 billion, from the year before. Certainly any drop is bad news, since consumer spending rarely decreases—but $40 billion out of total spending of $10 trillion doesn't seem like enough to wreak economic havoc.

A closer look, however, shows that Americans have tightened their belts more sharply than the numbers report. The reason? Official figures for personal spending include a lot of categories, such as Medicare outlays, that are not under the control of households. They also include items, such as education spending, that should be treated as investment in the future rather than current consumption.

After removing these spending categories from the data, let's call what's left "pocketbook" spending—the money that consumers actually lay out at retailers and other businesses. By this measure, Americans have cut consumption by $200 billion, or 3.1%, over the past year. This explains why the downturn has hit Main Street hard.

Since savings are what's left from disposable income after subtracting outlays, a deeper fall in consumption means a bigger jump in the savings rate. The same analysis implies that the "pocketbook" personal savings rate has risen from near zero a year ago to around 6.4%, rather than the official 4.2%. Thus, households may have gotten a great start on repairing their balance sheets.

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