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. Have a question, comment, or story to share? You can reach Medora at medoralee@thebalance.com.
