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Recovery? Savings Rates Fall to Their Lowest Point in 2012

Oct. 29, 2012 9:50pm Becket Adams

“Americans increased their spending in September at twice the rate that their income grew, a sign of confidence in the economy,” reads the lede to a recent Associated Press report.

Wait, hold on a second. Like most of the economic data put out over the past few years, this report requires a closer look.

Yes, there has been an increase in consumer spending. That much we know. And seeing as how this accounts for almost 70 percent of economic activity, this is a good thing, right? Well, according to writers at Zero Hedge, the report seems to confirm something a few analysts have long suspected, namely, that Americans are wiping out their savings.

“Today’s personal income and spending report for the month of September was just the latest datapoint confirming that the US consumer is once again massively cash-strapped and is eating, literally, into their savings,” Zero Hedge notes.

“While Personal Income rose at the expected pace of 0.4%, Spending in the last month came well above expectations of 0.6%, printing at 0.8%, which meant that on a net basis Consumers, always hopeful, outspent themselves by a margin of 0.4%,” the report adds.

The big takeaway from the data is the fact that savings rates have decreased from 3.7 percent in August to 3.3 percent in September, the lowest they’ve been in 2012.

“This was the lowest Savings print in 2012, and higher only compared to last November’s 3.2%, which in turn was the lowest print since the start of the second great depression,” the report continues.

Which begs the obvious question: What “recovery”?

“[O]vereager consumers saw their nominal incomes increase… and decided to outspend said rise at double the rate of increase! At this pace, by the time Thanksgiving rolls out, US consumers will have no savings at all left to tap and living will be strictly a month to month activity,” the report adds.

Zero Hedge Examines Recent Consumer Spending Reports, Finds Savings Rates Have Fallen to Their Lowest Point in 2012

Courtesy ZH

Amazingly enough, as the chart below clearly indicates, the bad news continues: Real disposable income (adjusted for the cost of living) declined for the second straight month.

“In other words, even real incomes are now consistently declining, spending aside,” Zero Hedge notes.

Courtesy ZH

What does it all mean?

“[T]he US consumer is tapped out, has hit peak earnings power, and is looking at a holiday season where spending is expected to ramp up drastically with empty bank accounts and maxed out credit cards,” the Hedge explains.

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Front page photo source courtesy shutterstock.com

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Comments (22)

myheck
Posted on October 30, 2012 at 6:57pm
The article misses a big factor -savings interest rates are so low that money is being transferred from “savings’” to “investments” in bonds, preferred stocks, etc. So I don’t think “savings rate” is always a sound number. This isn’t to say people aren’t hurting, or spending their savings, but it does mean microscopic interest rates are a large factor in “people wiping out their savings.”
But what do I know, I have never heard of a “Savings print” before.

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Konservative PUNK
Posted on October 30, 2012 at 9:08am
Do not kid yourself. It is all by design. Citizens with savings have no need of government welfare. Look to Europe. Individuals have nothing, and therefore depend on the government for everything. It’s about control. Some of us have invested our savings in precious metals like Gold, Steel, and Lead.

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hugo65hsv
Posted on October 30, 2012 at 7:19am
My personal savings have dropped, dropped, dropped over the past three years to zero as of this year.. My bills are paid, not in debt.. But prices are up on everything and my money is worth less.. Thanks Obama for your “fundamental transformation of America” too crap…

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myno1scf
Posted on October 30, 2012 at 12:48am
I am a professional engineering consultant. I have been practicing for 40 years, and I employ about 50 people. I have observed over the past four years what seems to be a frieghtening trend. Receivables have gotten progressively older. No matter whether I talk to my clients or vendors, the story is the same; cash is becoming more scarce, credit lines are rising, and altough our bills are paid, the future is looking increasing uncertain. I cannot be the only business man that believes despite some marginally better descriptions by the government, the economic outlook is riding on progressively thinning ice?

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- Konservative PUNK
  Posted on October 30, 2012 at 9:16am
  Yeah, no doubt. Just go to your bank and ask to close your account and take your savings in cash. They have made it virtually impossible to do. Once you jump through all the hoops and do meet the criteria, they will tell you that they don’t have enough cash to give you. Trust me, I went through it. We are a heartbeat away from a run on the banks that will make the depression look like ‘a bump in the road’.
  
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- KidCharlemagne
  Posted on October 30, 2012 at 2:03pm
  Konservative PUNK
  Posted on October 30, 2012 at 9:16am
  We are a heartbeat away from a run on the banks that will make the depression look like ‘a bump in the road’.
  ===========================
  
  What would a run on the banks really accomplish though these days? What would you expect to get?
  
  Back during the Great Depression, then people began showing up at the bank w/ their Federal Reserve Notes and expecting to exchange them for actual gold or silver….
  
  However, since the dollar is no longer backed by gold or silver (or anything for that matter), then all you will get when you make a ‘run on the bank’ is just another piece of paper (easily and cheaply reproducible).
  
  So I can’t exactly see what good it would do to make a run on the bank when there’s nothing actually there of value for anybody to withdraw?
  
  Report this comment
Ruuuuu
Posted on October 30, 2012 at 12:15am
Could just as easily be deflation which has been a long time coming. The Fed has been trying to avoid deflation since 2002. We should have taken the pain then it would have been a lot less painful. We have two great forces deflation a natural occurrence and inflation a monetary force that’s been hard at work since 2002. Say the fed never acted in 2002 we would have no housing boom and we would have gone into a very painful recession/depression but a necessary correction. This would have been a good thing then. But now the world is so over leveraged we have so much further to fall quadrillion in derivatives, trillions of personal debt, an sub-prime auto bubble ready to burst, an re-ignited sub-prime housing market, with banks still holding a untold number of foreclosures on the market. Yes when the shtf the fed will print but it will do nothing imo.

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308forfreedom
Posted on October 29, 2012 at 10:56pm
Go exempt on your federal income taxes, stop paying the tyrants.

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TommyGuns
Posted on October 29, 2012 at 10:51pm
If you factor in real inflation, e.g., food prices up more than 20%, and gas prices up 100% since 2008, it’s no wonder consumer spending has increased. So much of what we consume is produced overseas, and with the value of the dollar decreasing, everything is more expensive. In terms of a real spending increase, as in buying more than we did last month, or last week even, the report is nonsense.

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crusaderx9
Posted on October 29, 2012 at 10:48pm
You don’t have to be smart to understand we are headed for disaster if we don’t vote obama OUT – YOU have to be DANGEROUSLY STUPID not to understand the tragic end that awaits America if obama gets a second term…

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Tigress1
Posted on October 29, 2012 at 10:47pm
It sounds like people are getting into DEBT! How is this a good thing?

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13th Imam
Posted on October 29, 2012 at 10:39pm
Even when you have some “Saving Cash” you get a .25% return. Another advantage of having a DEMOCRAT Senate and Whitehouse.

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Dedshort
Posted on October 29, 2012 at 10:38pm
It is hard to imagine that the average family has much savings at this point. Maybe the unemployed are cashing out 401K plans since their unemployment has run out. Just wait until the Feds confiscate all of the privately held 401Ks, IRAs, and pension plans so they can save social insecurity.

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Fatheroftwo
Posted on October 29, 2012 at 10:07pm
The checking account has been bleeding for years and we’ve done about all we can to stay afloat……savings????? what the he!! is that???? Disposable income is a myth!!! I wish these Economist would, just for once, come down to Earth and live with the rest of us!!!!

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- TSUNAMI_22
  Posted on October 29, 2012 at 10:21pm
  The sad truth is that US, the electorate, are THE disposable income of the one’s we elected. Consider that, and then try to smile while you’re at work….if you’re fortunate enough to have a job.
  
  We are the cattle, the sheep, the lemmings that have made our bed. We forged these chains with our own selfish stupidity and now we, the pinnacle of human dumbassery, have to stew in our own juices.
  
  Report this comment
ArmedAndReallyPissed
Posted on October 29, 2012 at 10:05pm
I never did get a “free” Obozo Phone !! I guess i got left out of the RECOVERY.

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- progressiveslayer
  Posted on October 29, 2012 at 10:15pm
  I found the uneducated pustule on society who has one of those ‘free’ phones. Why couldn’t our ancestors pick their own cotton? http://www.youtube.com/watch?v=tpAOwJvTOio
  
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ShyLow
Posted on October 29, 2012 at 10:02pm
Mic check—Mic check

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Female
Posted on October 29, 2012 at 9:59pm
The kids needed new shoes, supplies, and clothes, the microwave and other appliances have broken, and people are purchasing things to work from home.

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TSUNAMI_22
Posted on October 29, 2012 at 9:59pm
Save what? Even the cash held in “savings accounts” is being depleted either by stealth high gas price taxes or in the sheer fact that nobody pays any interest on the account.

I think they should just keep printing more and more money to further devalue any value in the currency that’s left – which isn’t much.

You can’t save “good intentions” Mr. Federal Reserve….as if you ever had any “good intentions” in the 1st damn place.

Obama, Corzine, Dimon, Soros, Benanke….etc. They are all eagerly and pleasantly wringing their hands like the Grinch Who Stole Everything.

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- Oneirishman
  Posted on October 29, 2012 at 10:09pm
  You hit that outta the park!
  
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- progressiveslayer
  Posted on October 29, 2012 at 10:11pm
  Yes indeed inflation is the hidden tax brought to you by the pigs at the fed and when hyperinflation hits that’s when we’ll see change we can believe in. All the **** bags you mentioned should be in prison for life,vile bastards the lot of them.
  
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