The U.S. household savings rate continues to decline to historically low levels.
The savings rate was 3.7% in December 2023, 4% in the last three months, 4.1% in the last six months, 12% for the entire year, 7.4% before COVID in 2019, 6.5% between 2017 and 2019, and the long-term rate from 2010 to 2019 was 6.2%.
Monetary Impact
Why is the US household savings data important? It is a crucial resource for assessing investment opportunities.
For instance, in 2011, the savings rate was 6.6%, resulting in approximately $0.8 trillion per year. However, since then, the market has grown 4.5 times, and the U.S. Treasury Department's net borrowing requirement has nearly quadrupled from $0.4 - $0.7 trillion in 2013 - 2018 to a consistent $2 trillion now.
Changing Landscape
What seemed significant in 2011 through 2014 - up to $1 trillion in annual savings - appears negligible in 2024.
So, a decrease from $0.8 to $0.9 trillion in savings between 2023 and 2024 is relatively insignificant. To achieve this, interest costs must decrease, and revenues must increase significantly through spending consolidation, but the opposite is happening.
Net government support in personal income is -7.2% in December 2023, and -7.1% in Q4 2023, compared to -6.6% in 2023 versus -7.3% in 2019 and -7.7% in 2010 - 2019. This means that the fiscal policy in 2023 is not as stimulative as the record stimulus in 2020 - 2021.
Conclusion
In conclusion, the steady decline in the savings rate of U.S. households is indicative of a changing economic landscape. Understanding this data is critical to assessing investment opportunities. While the decline in the savings rate between 2023 and 2024 may seem small, it underscores the need to consider factors such as interest rates, income growth, and fiscal policy. The reduction in net government support in personal income suggests less stimulative fiscal policy in 2023 compared to significant stimulus in 2020 - 2021, which emphasizes the changing economic dynamics.