The U.S. household savings rate in November 2023 was expected to be close to a historic low of 4.1%.
Impact of Interest Costs
It's worth noting that interest costs have a negative impact. For example, non-mortgage interest rates are at 2.75% (the highest level since January 2008). For 6 million households, it is at 2.6%, and for 12 million households, it is at 2.4%, compared to 2.1% in 2019 and similar levels from 2017 to 2019.
When comparing the November data, non-mortgage interest costs had a negative impact of 0.6 percentage points on the declining savings trend.
Savings and Asset Allocation
It's important to note that savings directly affect the net ability to allocate financial assets, which can be invested in monetary assets, stocks, bonds, insurance, or pension reserves.
The average annual savings rate is 900 billion, but it is currently trending towards 800 billion. Households have become the primary providers of liquidity to the bond market, supporting the treasuries market.
The liquidity deficit is approximately 1.6 - 1.7 trillion per year, with pension funds, insurance companies, sovereign wealth funds, and direct strategic allies of the U.S. covering the rest.
Net Government Support
Net government support as a percentage of disposable income remains similar to the levels seen in 2016 - 2019. This calculation involves summing up government payments to the public for various targeted government programs and subtracting the total withdrawals from the public in the form of personal taxes. A negative value indicates that more is withdrawn than distributed, providing an estimate of the level of stimulus support relative to the population.
Conclusion
The U.S. household savings rate was expected to drop to a historic low of 4.1%, primarily due to rising non-mortgage interest rates. This reduction in savings, along with a 0.6 percentage point impact from interest costs, highlights financial pressure on households. Despite this, government support remains at levels similar to those of 2016 - 2019, indicating ongoing stimulus efforts.