Dean Baker thinks so

Actually, the United States economy is not being held back by a lack of consumer spending. The ratio of spending to income is still considerably higher than the pre-bubble average as reflected by the lower than normal saving rate. The problem is that the bubble had generated excessive consumption demand, which is not being replaced by any other source of demand.

I am not so sure. This is a genuine mystery to me which I want to get to the bottom of but it doesn’t look like there was a whole bunch of extra spending going on during the boom.

Here are retail sales as a fraction of disposable personal income

FRED Graph

The redline is the old series and the blue line is the new series which includes food service sales.

As you can see we were coasting along in the upper 30s and then feel precipitously in the wake of the crash.

What about the Personal Savings rate data that Dean cites. I think the key is finding out what goes in there. I am not actually sure how its calculated and I will need to look that up but I am betting a substantial and important portion of it is imputed.


So yeah, personal savings is simply personal income minus taxes minus personal outlays which is dominated by personal consumption expenditures which is in turn heavily imputed.

Also the math on my last graph was sloppy it should read like this

FRED Graph