The personal savings rate, as a percentage of disposable income, fell to 4.4 per cent in April, the lowest level since 2008 in the US, according to the Commerce Department.
“For some, the decline is a red flag for consumer spending, which accounts for 70 per cent of gross domestic product,” said Fox Business in its report about the decrease.
With consumer inflation at a 40-year-high, costs are rising for everything from fuel to food, chipping away at personal balance sheets, said the report.
The personal savings rate, as a percentage of disposable income, fell to 4.4% in April, the lowest level since 2008 according to the Commerce Department.
Total savings slipped to $815 billion. For some, the decline is a red flag for consumer spending, which accounts for 70% of gross domestic product (GDP).
“We’re starting to dip into savings because what generally happens in periods of inflation is you see demand destruction because prices just get too high and people just stop consuming whatever it is,” said Mitch Roschelle, Macro Trends Advisors LLC founding partner.
“While we haven’t truly seen demand destruction yet, the first thing that happens is people start dipping into savings because they’re not willing to slow down consumption.”
In a separate report, the University of Michigan’s consumer sentiment index fell over 10% in May to a reading of 58.4, the lowest since August 2011.
“The consumer is really pessimistic, the Michigan survey came out and told us that people are as pessimistic about consumption as they’ve been going all the way back financial crisis and one way you can see that is the savings rate has dipped to below 5% which is the lowest it’s been since the September of the Lehman [Brothers] crash.
So the consumer is seeing all this price news and thinking, ‘Whoa, I got to take it easy,'” said Kevin Hassett, former chairman of the Council of Economic Advisors for the Trump administration, during an interview on “Cavuto: Coast to Coast.”
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