Chart of the Day: Saving Rate Soars to 14-Month High in June
Perhaps the most frustrating statistic during a down economy is saving. In general, seeing consumers saving more money is a really great thing: it indicates that they'll have some cushion if life throws an obstacle at them and/or more money for retirement. Saving more indicates that people are exercising prudent fiscal behavior. But during a recession or recovery, saving is the enemy -- it indicates that less money is being plowed into the economy to stimulate businesses that would create jobs in response. That makes today's seemingly good news that the saving rate hit a 14-month high in June a little hard to celebrate.
Here's the chart, via Bureau of Economic Analysis data:
As you can see, at 6.7% in June, the growth of saving is the highest shown. And that's not all: the saving rate has been positive for three months straight. We haven't seen that occur since April through June 2010, a year earlier.
Of course, at that time the economy was headed for a soft patch. The U.S. is grappling with a similar slowdown this year, which explains the stronger saving trend. As mentioned before, it's great to see Americans saving, but if they were spending more, then we would likely see firms hiring at a faster pace. And with the unemployment rate rising for three months straight, a little less saving and a little more spending could go a long way.
Note: After just chastising the AP for not mentioning inflation when analyzing an economic report, I wanted to explain why it isn't considered here. In short, BEA doesn't provide inflation-adjusted savings numbers. And you can't really calculate it from the inflation-adjusted statistics it does provide. But considering that real incomes grew by so much and that spending was virtually flat, it's pretty safe to assume that on an inflation-adjusted basis, saving would have looked even stronger in June.