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Sharp Decline In Savings Ratio In Past Two Months

US DATA
  • The spending and income data weren’t far from expectations in July, although slightly more spending (both vs already strong consensus and the June revision) and a little less income growth meant a faster decline in the household savings ratio.
  • Details: personal income increased 0.2% (cons 0.3) after 0.3% M/M, but personal spending increased 0.8% M/M (cons 0.7) after an upward revised 0.6% M/M (initial 0.5).
  • It meant the household savings ratio fell further to 3.5% in July from 4.3% in June and its recent high of 4.7% in May, touching its lowest since November and helping further run down the level of “excess savings”.
  • As noted previously, the SF Fed has recently released research estimating these excess savings stood at less than $190B by June and could be depleted during Q3. The analysis highlights the wide range of estimates concerning excess savings, as a different approach using prior Federal Reserve methodology suggested perhaps 1 to 2 quarters longer. Nevertheless, the main takeaway is that at least compared to historical trends, we’re getting towards a period when prior savings accumulated during the pandemic are starting to have run out on aggregate.

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