U.S. Savings Rate at Highest Level Since the 1950s

In the past 20-plus years, the personal saving rate in the U.S. (the portion which is not consumed in the DPI) has fallen sharply from about 9% in 1985 to 1.75% in 2004, affecting the life of individuals and that of the economy. But, given Americans current pessimism about the country’s economic outlook that’s about to change. According to The NYT, for the first time since WW II, Americans are spending fewer dollars than they spent a year earlier.

That reluctance — or inability — to spend has led to the sharpest rise in the savings rate in this country since the government began calculating the statistic in the 1950s.

“People’s attitudes toward credit and home ownership are undergoing a fundamental shift,” said David A. Rosenberg, the chief economist and strategist of Gluskin Sheff, a money management firm based in Toronto.

Mr. Rosenberg said he expected that the savings rate, which rose to a 14-year high of 5.7 percent of disposable income in April, would continue to grow until it surpassed the record high of 14.6 percent, set in May 1975, when the country had just emerged from a severe recession. [NYT]

emphasis added

Over the three-month period, the savings rate averaged 4.8%. The accompanying charts show the trends.

Graph: NYT

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