How The Savings Rate Suddenly Jumped To 5%

We’ve been groping for good news, so the recent rebound in the US consumer savings rate to 5% seemed to fit the bill. 

The long-term average savings rate, of course, is 10%, which means that there’s another 5% to go, but 5% is a whole lot better than 0%, which is where the savings rate was when everyone was living off of mortgage equity withdrawals.

But now the NY Post’s John Crudele goes and ruins the ride:


Here’s how this “good news” came about.

Because of the recession, the US Treasury is estimating that its revenues will be down for the coming year.

That’s mainly because of lower (or no) capital-gains tax payments, because people will report tax losses in the stock market and, of course, because many folks have lost their jobs and paid less income tax.

If the Treasury is receiving less revenue, the Commerce Department figures this money must still be in taxpayers’ pockets.

And if it remains in the possession of taxpayers, then people must be saving some (perhaps 5 per cent, Commerce figures) and spending some.

Yet did the government ever think that the money isn’t reaching people’s pockets, and as a result it is neither being spent nor saved?

A source in the Commerce Department chuckled when I asked about these numbers, explaining that these figures “are the very first estimates,” which means they are the ones “most subject to revisions.”

And people shouldn’t take them very seriously.

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