Thursday, June 21, 2007

Negative Savings Rate: Not to Worry

Well, don't worry much about the United State's negative rate of savings, says a report from Charles Steindel of the research and Statistics group at the Federal Reserve Bank of New York. The complete report is posted in the Policy reports section

Reasons do exist for concern about low savings, Steindel says. But, overall, "Many of the obvious concerns about the negative personal saving rate may be unfounded. The negative value could be attributable to preliminary data, which the BEA could very well revise upward; a temporary depressing effect brought on by higher energy costs; and a dampening effect owing to
the surge in corporate share repurchases. Looking at the private sector on a consolidated basis,we find that saving, while quite low, is certainly neither negative nor remarkably lower than it was in the late 1990s. National saving as a whole has also been low, but it has not fallen recently—indeed, the broadest measure has edged up.
"Despite the low personal saving rate, aggregate household wealth has risen sharply in the past few years. U.S. households would not be a lot wealthier today—and thus better able to cope with a decline in asset values—if they had been saving at a substantially higher pace over the past few years. Furthermore, we uncover no strong evidence to suggest that low personal saving today would be associated with lower spending growth tomorrow."

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