Economist Mike Walden: The Dip in Saving

It was recently reported the US personal saving rate dipped to a 12-year low.  Does this indicate trouble, especially since households appear to be spending more?

  1. US personal saving rate is now 2.4% of personal income, lowest since 2005
  2. in contrast, immediately after the Great Recession, it had jumped to over 10%
  3. understandable – during and just after the recession, people scared – cut back on spending and saved more now consumer optimism is at a 17 year high
  4. motivates households to spend more and save less
  5. low saving also impacted by rising value of assets, like stocks and homes
  6. and although debt is rising, still much lower than before the recession
  7. as long as wages and incomes rise and borrowing is modest, all OK
  8. but if income gains sputter and borrowing takes off, then a problem