Americans Saved $1.1 Trillion Less Than Previously Thought over 5 Years

U.S. households saved some $1.1 trillion less than previously thought over the past six years, according to revised government data released Thursday.

As part of a comprehensive update of some of the nation’s most-important economic statistics, the Bureau of Economic Analysis (BEA) now calculates that Americans stashed away an average 8.3 percent of their disposable income each year from 2017 through 2022, down from a previously estimated 9.4 percent. The reduction stems from an accounting adjustment that lowered personal income from mutual funds and real estate investment trusts.

The state of household finances is a key question facing the economy going forward as consumers confront increasing headwinds from high gasoline prices and the resumption of student-loan payments.

Americans were able to build up extra savings during the pandemic, in part thanks to large government support, but have since seen that eroded by elevated inflation and a return to more normal spending patterns as fears of Covid-19 receded.

The comprehensive update, which is carried out about every five years, re-based the reference year from 2012 to 2017 for a more representative picture of changes in economic activity. During these updates, BEA incorporates new data sources and refreshes its methodology.

Much of the reduction in personal savings seen in the revised data occurred prior to the pandemic, so its implications for how much extra cash Americans may feel they have now is not clear cut.

More broadly, the economic landscape presented in the update looks largely the same as before, according to BEA director Vipin Arora. Here are some of the other changes:

Inflation.  As measured by the personal consumption expenditures (PCE) price index, the pace of inflation was revised higher heading into 2023. For the fourth quarter of last year, that gauge is now seen to have climbed at a 4.1 percent annual pace—up from 3.7 percent previously, and more than double the Federal Reserve’s 2 percent target.

GDP.  The pandemic contraction is seen as being a bit less severe than previously thought: Gross domestic product (GDP) is now reckoned to have dropped at a 28 percent annual clip in the second quarter of 2020, instead of 29.9 percent, as the government shut down swathes of the economy to fight the spread of the virus. But the recovery since then has been somewhat slower, according to the update. Growth last year was revised to 1.9 percent from 2.1 percent.

Gross domestic income.  The report also offered some insight into one of the economy’s many puzzles: The significant divergence between GDP—the total value of all goods and services produced in the economy—and gross domestic income (GDI), which calculates all income generated from producing those goods and services. In theory, the two should be equal, but in practice the measures can occasionally offer differing pictures of the economy.

The revisions narrowed the difference between the two. In 2021, that was in large part due to an upward adjustment to the growth rate for GDI. In 2022, it primarily reflected a downward revision to GDP.

‘Supercore’ inflation.  The comprehensive update also created two new PCE price index metrics: the PCE price index excluding food, energy, and housing; and prices for services excluding energy and housing. Fed policymakers have tagged the latter, known colloquially by economists and investors as “supercore” inflation, as central to the inflation outlook. The figures will be available quarterly as well as monthly. Data watchers previously had to calculate this metric themselves. The BEA will include a new table on contributions to PCE prices as well, shedding light on which particular goods and services impacted inflation in that particular month or quarter.

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