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The Chart of the Day below shows both the Revised and Unrevised estimates for the Savings Rate, Private Sector Income Growth and Real Consumption Growth.
- Savings Rate: The savings rate had previously been estimated to be running near all-time lows (2.7% last) while falling 80-100 bps year-over-year the past few years. The falling savings rate was supporting consumption growth in the face of flattish aggregate income growth, but with little downside left it was set to become a progressively diminishing tailwind to consumption growth. In other words, the onus would increasingly fall on wage growth which would have to accelerate meaningfully to buttress household spending growth. That is no longer true following the revisions. In fact, the dynamic has reversed.
- Income Growth: Prior to revision, comps for aggregate private sector income growth were progressively easier through August and, by extension, supportive of consumption growth. That is no longer the case following the revision. In fact, comps actually get progressively more difficult the next few months before easing into year end.
- Consumption Growth: Comps for Spending Growth, in contrast, are modestly easier the next couple months relative to what they were prior to revision.
Triple-net, none of this changes our outlook for the path of growth and inflation over 2H but it doesn’t represent a significant shift in the prevailing, underlying fundamental dynamics.
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