Weekly Updates
Weekly Updates
- The fourth industrial revolution is blurring the distinction between consumers and businesses. Consumers furnishing their homes are also investing in capital equipment for their employers, if they work flexibly. The profits of a self-employed person may be treated like wage income, but are reported under a different label.
- During the pandemic the number of small business startups accelerated significantly. This has implications for measuring household savings. While income taken out of a small business and paid to the owner is used in the calculation of the personal savings rate, income that is saved within the business is likely to be considered corporate savings, especially if the small business is registered as a company.
- Why does this matter? Household savings rates have been trending lower in recent quarters. In the United States, the household savings rate has fallen to 3.2% of disposable income—well below its pre-pandemic average. Superficially, that suggests consumers cannot cut back much further on savings in order to support consumption.
- If, however, part of consumer saving is hidden away in bank accounts that are officially classified as corporate, consumers have more ability to support the economy. The resilience of consumers in some advanced economies may be because households have more money hidden away than official data suggests.
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