A little note on US personal savings
The good news is that it appears to be that Joe and Jane Consumer's descent into the nether-regions of debt-for-consumption has moderated. The bad news is that the new equilibrium is still negative.
Personal outlays -- PCE, personal interest payments, and personal current transfer payments increased $25.9 billion in November, compared with an increase of $14.0 billion in October. PCE increased $25.3 billion, compared with an increase of $13.4 billion.While US households are no longer in the debt-fest days of the summer when they went into yet another car-buying frenzy, November's negative personal savings rate makes it a solid half year -- six months in a row and seven of the last eight months -- of dissaving. Call it a "consumer binge" if you like.
Personal saving -- DPI less personal outlays -- was a negative $19.1 billion in November, compared with a negative $18.3 billion in October. Personal saving as a percentage of disposable personal income was a negative 0.2 percent in both November and October. Negative personal saving reflects personal outlays that exceed disposable personal income. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods.
This consumer binge is not only dependent on debt. It is also dependent on exceptionally low inflation. Overall annual PCE inflation in November ran at just 2.7%. Core annual PCE inflation (minus food and energy) is a meager 1.8%. After peaking at 2.0% in the summer, core PCE inflation is now trending downwards again. Durable goods deflation is persistent -- as it has been since 1995 -- but has significantly picked up pace over the last six months, with help from deflation in imported consumer durables (running at a -0.2% pace y-o-y).
Try as it might, the Fed just can't get Americans to stop buying. We're now on track for an annual 2005 personal savings rate of -0.4%, the lowest rate since 1933 -- the depth of the Great Depression. Remember that.