Personal Savings Rate Negative Again
Personal Savings Rate was negative again, now for the fifth month in a row, at -0.7%.
Consumer spending edges higher in October
The saving rate, the percentage Americans sock away after spending, taxes and interest payments, was minus 0.7 - the fifth straight negative reading. The saving rate has not been positive since March.
Personal Income also came in a notch below estimates.
Personal income also rose in October, by 0.4 percent - slightly less than the 0.5 percent increase forecast by Wall Street
Here is a direct link to the BEA report:
PERSONAL INCOME AND OUTLAYS: OCTOBER 2005
Personal saving -- DPI less personal outlays -- was a negative $61.5 billion in October, compared with a negative $70.9 billion in September. Personal saving as a percentage of disposable personal income was a negative 0.7 percent in October, compared with a negative 0.8 percent in September. Negative personal saving reflects personal outlays that exceed disposable personal income. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods. For more information, see the FAQs on "Personal Saving" on BEA's Web site.
Keep in mind this is October data.. With consumer spending still rolling along at a brisk pace, I'm sure the November and December data won't be pretty either.
Caveat Emptor,
Grim
Consumer spending edges higher in October
The saving rate, the percentage Americans sock away after spending, taxes and interest payments, was minus 0.7 - the fifth straight negative reading. The saving rate has not been positive since March.
Personal Income also came in a notch below estimates.
Personal income also rose in October, by 0.4 percent - slightly less than the 0.5 percent increase forecast by Wall Street
Here is a direct link to the BEA report:
PERSONAL INCOME AND OUTLAYS: OCTOBER 2005
Personal saving -- DPI less personal outlays -- was a negative $61.5 billion in October, compared with a negative $70.9 billion in September. Personal saving as a percentage of disposable personal income was a negative 0.7 percent in October, compared with a negative 0.8 percent in September. Negative personal saving reflects personal outlays that exceed disposable personal income. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods. For more information, see the FAQs on "Personal Saving" on BEA's Web site.
Keep in mind this is October data.. With consumer spending still rolling along at a brisk pace, I'm sure the November and December data won't be pretty either.
Caveat Emptor,
Grim
9 Comments:
In other economic news, the ECB (European Central Bank) raised interest rates a quarter point this morning.
ECB Raises Key Rate by a Quarter-Point
FRANKFURT, Germany - The European Central Bank raised its key interest rate on Thursday by a quarter of a percentage point to 2.25 percent, its first rate hike in five years.
grim
ISM Index came in postive today. While the prices paid index dropped down from last months peak, it is still elevated enough to warrant concern.
Unemployment numbers also positive.
This data keeps pointing to more rate hikes on the horizon.
grim
Grim:
Correct me if I am wrong. The Disposable Personal Income (DPI) figure used to calculate Personal Savings does NOT include income that is placed in tax-deferred arrangements, such as 401(k)'s, IRA's, and deferred compensation.
It does not undo the gravity of these numbers, yet the caveat is that there may be an undercounting of the actual savings that may be occurring.
The main issue though is that once placed in a tax-deferred vehicle, these funds are not easily accessible, but they do in fact exist, and could be accessed if necessary.
Interestingly, even though bankruptcy laws have been recently overhauled, funds in Company Savings Plans have always been shielded and IRA's have recently been awarded the same protections in court.
chicago
Grim Ghost,
About the OFHEO data released today, remember, it is Q3 data: July, August, and September.
I agree 100% with their results, appreciation was there, but the pace had moderated.
The fact is, we're not going to see a clear trend in the OFHEO data until Q4 at the earliest, more likely Q1 of '06.
grim
Angrybear has some great graphs based on the OFHEO numbers that illustrate the current trend as well as the late 80's housing crash.
House Prices
grim
Richard:
agreed - you would think that they would offer this number somewhere in the meat of the news release.
If they can conjure up the rest of these figures to be measured, deferrals shouldn't require much more effort.
If they are consistently ignored, maybe their relevence is incidental. However, something tells me that it is a weakness in the analysis, because it reflects an "ability to save" - more slack in the belt to be used if squeezed.
Hence, maybe there is more slack in the system than there appears.
I certainly hope not - I want mass hysteria and I want it now :)
chicago
I agree with those points, however I have yet to see any data that shows those deferred funds to have either increased or decreased significantly from the mid-90s until today. If that isn't the case, the data series is still quite valid.
I read a Time magazine article on 401(k)s a few months back that stated while the average 401(k) account contained something on the order of ~$45k, more than half of those accounts contained roughly ~$10k.
Unfortunately, I think many people have made the mistake of treating home equity as their retirement nest egg. A very poor choice, especially from the viewpoint of diversification. Unfortunately, many have already squandered away their savings believing they were living in a golden-egg laying goose.
You know, the behavior isn't all that different from what we saw from the pets.com millionaires (on paper of course).
grim
Save Who the hell needs to save. You don't need any m oney down to buy a house car or miscellaneous items.
Call it a ponzi. Monthly pay ponzi.
What a racket the reatailers and the realtors and builders have done. They have convinced Consumers that spending is better than savings and think in terms of monthly payments to take away from the overpriced goods they are trying to sel you.
I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
the indexes easily.
Take a look at Wallstreetwinnersonline.com
RickJ
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