It was even worse than that. The savings rate fell from 3.3% to 2.6%. If it had stayed the same, real "personal consumption expenditures" would have been just 0.8% (annualized) instead of 3.8% and GDP would have been 0.6% instead of 2.6%. So, after all the disaster spending we "only" got 2.6% GDP growth. The underlying economic growth rate is actually closer to 0.6% since that disaster spending was a "one off."
The savings rates of America plunged due to an unprecedented surge in credit card expenditures during the last quarter of 2017. It's really quite stunning (and unsustainable):
|An Unsustainable Surge of Credit Card Expenditures--Unlikely to be Repeated in Coming Quarters|
|Graph from Real Investment Advice|
|Graph from Lance Roberts at Real Investment Advice|
US consumers are already in record debt and they went on a spending spree at the end of 2017. They had to -- they aren't making ends meet in their personal finances and haven't been doing so for a long time. US consumers are tapped-out. The US real personal savings rate dropped to an extremely low 2.6%. US consumers are 70% of the total economy. See below:
That 2.6% personal savings rate is about as low as it goes. Note that rate was also reached in 2008, just before the great financial crisis in 2008 (savings rate was 2.3% then). An extremely low savings rate that signals a recession.
So, I'm warning you now that, despite all the narratives in the lying media and from lying economists, we're not in a "boom" or an "overheating" economy. The truth is that we're much closer to recession than boom. And because of all the corporate, personal and government debts that have built-up since the last recession, the next recession will be bad or worse. In fact, you can expect a 50% loss (or more) of your net worth!
Each time the US savings rate drops to current levels, it signals an economic top and subsequent recession. The past two recessions have been accompanied by large losses of net worth. The 2009 recession saw about a 30% decline in household net worth (includes stocks, bonds, real estate, etc). It's likely to happen once again, but worse. As of today , household wealth as a percent disposible income is over 700%. Just extrapolating trends, a trip back to 450% to 500% or a 36% decline in household worth or more can be expected.
|The Last Time That the Savings Rate Reached Current Levels, Household Wealth declined by 30%. We're Facing the Same or Worse Prospects in February 2018|
Graph from Econimica blog
YOU HAVE BEEN WARNED.