Personal Savings Decline As Inflation Takes a Toll

That’s how many years it’s been since consumers saved so little in a month, according to government data released Thursday, reflecting how much the recent surge in inflation has eaten into incomes.

The seasonally adjusted annual personal saving rate—that’s the share of after-tax income that consumers save after spending—fell in November for the fourth straight month to 6.9%, the lowest level since December 2017, when it was 6.6%, the Bureau of Economic Analysis said. That’s a far cry from the record saving rate of 33.8% recorded in April 2020, around the start of the pandemic, when incomes were bolstered by pandemic aid and spending was constrained by shelter-in-place orders.

The steady decline in the saving rate is a reflection of reduced government aid as well as soaring inflation. The personal consumption expenditure price index, the Federal Reserve’s preferred inflation measure, in November jumped 5.7% from a year earlier, the bureau said, the fastest pace since 1982. While disposable personal income increased 0.4% from October, after accounting for inflation it actually fell 0.2%.

Economists generally agree that consumer spending—which rose 0.6% in November from October—will continue to grow next year, buoyed by enormous pent-up savings from the pandemic. Even so, Grant Thornton Chief Economist Diane Swonk warned in a report that “we are rapidly draining that savings,” with the lowest-income households expected to run out of the savings they’d built up a year or so ago.

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