A sharp drop in the savings rate has been fueling the recent round of consumption. Savings as a percentage of GDP has fallen to 3.0% in Q1 2012. This percentage represents a sharp decline late 2008 crisis highs of 4.8% (see chart 2). Who needs savings or private investment when the government will take care of that.
It doesn't make me proud to say it, but a world of financial hurt is heading towards a still largely unprepared public.
Chart 1:
Chart 2:
Headline: Economy in U.S. Grew Less Than Forecast in First Quarter
The U.S. economy expanded less than forecast in the first quarter as the biggest gain in consumer spending in more than a year failed to overcome a diminished contribution from business inventories. Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2.2 percent annual rate after a 3 percent pace, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 2.5 percent rise. Household purchases increased 2.9 percent, exceeding the most optimistic projection. Homebuilding grew the fastest in almost two years.Source: bloomberg.com
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