Saving and Investment

Revised Figures Show Savings Decline

Earlier this year government economists reported that the personal savings rate for Americans appeared to be trending higher in 1995 and hit a four-year peak in 1997. But revised data released recently shattered that notion.

  • According to the government's latest figures, the savings rate for 1997 looks to be less than 4 percent for the first time in 50 years.

  • Private economists, however, suspect it could actually be less than 3 percent.

  • They theorize that the stock market boom has convinced people to spend more freely out of current income.

  • Stocks are now the largest asset in household balance sheets -- accounting for one-third of net worth and surpassing the value of real estate holdings for the first time ever.

Economists are divided over whether a market correction would rein in consumer spending -- a development which, if sizable enough, might trigger a recession.

Source: Gene Koretz, "The Uncertain Wealth Effect," Business Week, October 20, 1997.

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