Anomalies In The Measurement Of Savings And Growing Wealth Suggest That
Measured Savings Rates Are Not As Big A Problem As They Appear To Be
By Susan M. Sterne
Susan M. Sterne is president &
chief economist of Economic
Analysis Associates, Inc., which
provides research and consulting
services on the consumer sector to
institutional investors and industry.
Her expertise extends to all aspects
of the consumer, including quantitative,
demographic, and behavioral.
Her approach is mostly “bottom
up” and includes detailed
company analysis together with primary economic
research. She received the NABE Outlook Award from the
National Association for Business Economics in 2002.
Prior to founding Economic Analysis Associates in 1979,
Mrs. Sterne was vice president and manager of the
Consumer Research Group at Salomon Brothers and had
previously held economic research posts with other Wall
Street firms, including Faulkner, Dawkins & Sullivan;
Cyrus J. Lawrence, Inc.; and Goldman Sachs and
Company. She has served on advisory boards of the U.S.
Department of Commerce and the University of Michigan
Survey Research Center and is past chairman of the
Conference of Business Economists.
The saving rate and amount of consumer savings has
taken on heightened importance in both the cyclical
and secular settings. Does the current low consumer
saving rate imply that spending must grow less than
income in coming months, therefore slowing economic
growth? Does the large and soon-to-reach-retirementage
Post WW II baby boom population have enough
savings to continue to support consumption and economic
growth over the next decade? To answer these
questions, we first look at how well the standard NIPA saving rate measures savings, and we find it inadequate.
We then turn to the more difficult task of determining the
amount and adequacy of consumer savings for the large,
soon–to–retire baby boom population.
By Susan M. Sterne