The savings rate is at its lowest point since the recession
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Let’s do a thought experiment: for every dollar that you make, how much do you save? According to the U.S. Department of Commerce, it’s probably a lot less than you have in the past. Last week, the department released data showing that the personal savings rate was its lowest point since before the great recession. And that has some people worried.
When consumers have high confidence in the economy, they tend to spend more money and save less. In fact, according to Jeanna Smialek, who covers the Federal Reserve and the economy for Bloomberg, consumer spending accounts for 70 percent of the economy. So why is too much spending, and not enough saving, a bad thing? The problem is what happens when all the growth slows.
“It looks like, historically, the savings rate can only fall to, sort of, a certain level before it just can’t fall anymore because consumers aren’t willing to save any longer,” said Smialek in an interview with Marketplace host Kai Ryssdal. “And so this could be a real barrier for growth going forward if we see this trend continue.”
Click the audio player above to hear the full interview.
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