How Worrisome Is a Negative Saving Rate?
The U.S. personal saving rate’s negative turn in 2005 has raised concerns that Americans
may have to curtail their spending and accept a lower standard of living as they pay off rising
debts. However, a closer look at saving trends suggests that the risks to household well-being
are overstated. The surge in energy costs may have temporarily dampened saving, while the
accounting of household income from stock holdings may be skewing saving estimates. Moreover,
broad measures of saving have remained positive, and household wealth is on the rise.
P ersonal saving has been negative since the
second quarter of 2005. For 2005 as a whole,
current data from the Bureau of Economic
Analysis (BEA) show a personal saving rate of -0.4 percent—
a figure that dropped to -1.1 percent in 2006 (Chart 1). These
readings are well below the 1999-2004 average of 2.2 per-
cent, a good deal below the 1993-98 average of 4.6 percent,
and considerably below the 1950-92 norms of 8.6 percent.
Negative saving would seem to point to growing indebt-
edness and, ultimately, a decline in living standards,
as Americans tighten their belts to pay off debts. As
Mr. Micawber noted in David Copperfield,“Annual income
twenty pounds, annual expenditure nineteen nineteen and
six, result happiness. Annual income twenty pounds,
annual expenditure twenty pounds ought and six, result
Concerns that negative saving could jeopardize U.S.
household well-being suggest that a closer look at the
recent saving trends and their sources is warranted. In this
edition of Current Issues, we identify some of the forces
depressing measured personal saving, examine how
broader saving measures have fared, and assess the likeli-
hood that low saving rates will constrain consumer spend-
ing and impede growth in the nation’s living standards in
the near term.
We find that overall, many of the concerns about the
negative saving rate may be unfounded. Rather than sig-
naling a change in underlying household be