Americans have been saving more than was thought

US rate revised higher after statistics overhaul, with GDP figure also altered

Kadhim Shubber in Washington

The US savings rate was higher in recent years than previously measured, according to revised official figures that assume greater levels of tax evasion by business owners.

The data show the average savings rate at 7 per cent between 2013 and 2017, up from the previous figure of 5 per cent.

The revision came in the latest economic statistics update from the Bureau of Economic Analysis, which included higher estimates of the amount of income proprietors fail to report to tax authorities.

“This shift in the rate is an income story, it is not a consumption story,” said David Wasshausen, head of the national income and wealth division at the Bureau.

The Bureau also revised down gross domestic product growth for 2017 from 2.3 to 2.2 per cent, with much of the reduction falling in the second half of the year.

The revisions moved GDP growth in the fourth quarter of last year down from 2.9 to 2.3 per cent, largely due to new estimates of business inventories and fixed investment.
 In the years 2012 to 2016, the Bureau made similar adjustments to quarterly GDP growth, with upward revisions in the first half of the year and downward revisions in the second half, in part due to updated seasonal adjustments.

Every five years, the Bureau issues a comprehensive update of the national income and product accounts, incorporating new measures of economic growth and estimates for price information.

The Bureau figures published on Friday indicated an extra $650bn of proprietors income from 2012 to 2017, or an average 8 per cent upward revision in each of those years. Proprietors income measures the profits made by sole proprietorships and partnerships.

The numbers drew on a tax gap study done by the Internal Revenue Service in 2016 and drove much of the upward revision in the savings rate.

The personal savings rate in the US has been on a long decline since the 1970s, a trend that began to reverse after the financial crisis. The figure is calculated by comparing the difference between disposable incomes and personal expenditures.

This latest update left the economic picture relatively unchanged in aggregate, with average annual GDP growth between 2012 and 2017 unchanged at 2.2 per cent.

The data showed an increase in technology investment, largely due to a better understanding of cloud computing supply chains. Bureau officials had “been a bit puzzled” about why some cloud computing investment appeared to be missing from the previous data, said Erich Strassner, head of its industry applications division.

He said the Bureau had carried out an analysis of global supply chains to understand the problem better and had reclassified certain imported servers and storage devices from intermediate inputs — or partially finished goods — to final, fixed investment related to cloud computing.

“The result of all this is going to be an upward revision to high-tech investment,” said Mr Strassner.

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