A contrarian note about the falling personal saving rate...💸

It's not great, but not obviously a bad signal 🤔

Consumers continue to spend.

According to BEA data released Thursday, personal consumption expenditures increased 0.5% month over month in April to an annual rate of $21.98 trillion, an all-time high. Adjusted for inflation, real personal consumption expenditures increased 0.1% from the prior month to another all-time high.

What’s striking is that disposable personal income declined by 0.1% during the period.

Taken together, the personal saving rate fell to 2.6%, the lowest level since June 2022.

The personal saving rate fell to its lowest level since June 2022. (Source: BEA via FRED)

All else equal, this is not great. The implication is that more people are drawing from their savings to support their spending amid inflationary pressures.

However, all else is never equal. And incomes and savings rates give an incomplete picture of household finances.