[DantesPeak]

Personal savings are running at a minus 1.7% of personal income – almost a record. The much proclaimed resilience to high energy prices is then only due to the willingness of US consumers to borrow ever greater amounts of money. Money provided, at a rate approaching $1 trillion per year, by foreigners.

No doubt this situation can not continue forever, and US demand for energy will fall in a recession. That does not necessarily mean that energy prices will fall, as the dollar may sink and the Fed will go back to its inflationary ways when it sees the economy in recession - at the same time crude oil supplies are peaking.
$this->bbcode_second_pass_quote('', 'P')ERSONAL INCOME AND OUTLAYS: MAY 2006:
Personal income increased $38.3 billion, or 0.4 percent, and disposable personal income (DPI) increased $31.6 billion, or 0.3 percent, in May, according to the Bureau of Economic Analysis.
Personal consumption expenditures (PCE) increased $40.3 billion, or 0.4 percent. In April, personal income increased $76.2 billion, or 0.7 percent, DPI increased $52.4 billion, or 0.6 percent, and PCE
increased $65.3 billion, or 0.7 percent, based on revised estimates.

Personal outlays -- PCE, personal interest payments, and personal current transfer payments increased $41.1 billion in May, compared with an increase of $66.2 billion in April. PCE increased $40.3 billion, compared with an increase of $65.3 billion.

Personal saving -- DPI less personal outlays -- was a negative $162.9 billion in May, compared with a negative $153.5 billion in April.

Personal saving as a percentage of disposable personal income was a negative 1.7 percent in May, compared with a negative 1.6 percent in April. 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.

[Heineken]

I heard someone on "Nightly Business Report" last night state that the average American family has only enough money put aside to cover expenses for about a month (I can't recall the exact time period, but it was in that range). To me that's an even scarier statistic.

People are living on the edge, truly. We're in terrible shape for a recession, when it finally comes. That will exaggerate the magnitude of the earthquake.

[oilfreeandhappy]

I read an article today that talked about the affects of gasoline prices on the American economy:
http://biz.yahoo.com/ap/060630/economy.html?.v=12

The most interesting paragraph was the last, which parallels what's described in this thread:

"Americans' personal savings rate, the amount of saving left from disposable income, dipped to a negative 1.7 percent in May, down from a negative 1.6 percent in April. The savings rate has been negative for 12 consecutive months, meaning that Americans are dipping into savings or borrowing more to finance a spending level that is exceeding their after-tax incomes."

I don't think it's a good combination when your Federal Government is borrowing beyond their means, and the society that they govern is doing the same.

[mekrob]

It's been noted on this board (and maybe in the papers also, I can't recall exactly) that the last time this happened was during the Great Depression. Of course we don't know this for sure as records were only started to be kept in the late '40's or early '50's, but you can kinda bet that it didn't happen during the war when the economy was pretty good (for the US) due to the war-time need for goods and better climate and the Great Depression speaks for itself. Quite the bitch, eh?

[DantesPeak]

$this->bbcode_second_pass_quote('mekrob', 'I')t's been noted on this board (and maybe in the papers also, I can't recall exactly) that the last time this happened was during the Great Depression. Of course we don't know this for sure as records were only started to be kept in the late '40's or early '50's, but you can kinda bet that it didn't happen during the war when the economy was pretty good (for the US) due to the war-time need for goods and better climate and the Great Depression speaks for itself. Quite the bitch, eh?

[DantesPeak]

A very interesting discussion on negative savings and oil over at The Oil Drum:



The Oil Drum - Energy Prices, Inflation, and Personal Savings

[Heineken]

Can you clarify what the x-axis represents?

[DantesPeak]

That's savings as a per cent of (official) total personal income.

The red line is the monthly savings % as reported by the government, with moving average as solid line.

You'l have to read the TOD to find out what the Energy Adj. PSR is.

[lotrfan55345]

Imagine if the US has 16% savings rate like some contries.

[Shadizar]

In my opinion, this is one of the most significant economic statistics in existance (for the U.S. and globally). Regardless of GDP, core CPI, etc... this is the real guage of the economy, to an extent.

IF, the country is doing so well, why are the majority of Americans' spending more than they earn?

I am totally unconvinced that the U.S. economy is doing spectacularly. When you look at the empoyment figures released by the government, you see that most of those jobs are coming in the service sector.

The U.S. is loosing jobs from manufacturing. There are gains in retail and finances. My question is, how long can the U.S. service and financial economy last when other countries are learning the "tricks of the trade." These people that the U.S. competes with aren't stupid. They'll figure it out sooner or later. At that point the "services" industry will move overseas as quickly as the manufacturing jobs have gone (i.e. banking).

"Free Market" economists will say this is a good thing. Perhaps it is on a global scale. However, the U.S. will loose out in this exchange. In a free market atmosphere that is fine (and the bankers know this). However, for the average American, this will only be a disaster.

-Shadizar

[mekrob]

$this->bbcode_second_pass_quote('', 'I')F, the country is doing so well, why are the majority of American's spending more than they earn?

[ohanian]

$this->bbcode_second_pass_quote('mekrob', '')$this->bbcode_second_pass_quote('', 'I')F, the country is doing so well, why are the majority of American's spending more than they earn?

[Falconoffury]

Ohanian, if that's true, then doomers must make up a much larger percentage of the USA population than I ever imagined.

[rwwff]

$this->bbcode_second_pass_quote('Shadizar', 'I')F, the country is doing so well, why are the majority of Americans' spending more than they earn?

[Concerned]

$this->bbcode_second_pass_quote('Shadizar', '
')"Free Market" economists will say this is a good thing. Perhaps it is on a global scale. However, the U.S. will loose out in this exchange. In a free market atmosphere that is fine (and the bankers know this). However, for the average American, this will only be a disaster.
-Shadizar

[Concerned]

$this->bbcode_second_pass_quote('rwwff', '')$this->bbcode_second_pass_quote('Shadizar', 'I')F, the country is doing so well, why are the majority of Americans' spending more than they earn?