A lower Personal Savings Rate doesn't necessarily mean people are "consuming" more. At least not the sort of consumption (discretionary) that many businesses care about. It simply means that the proportion of income being saved is lower. There are any number of factors that could make that true, including rising costs of living or inflation vis-a-vis stagnant income.

In fact, while personal income has been increasing on a low nominal basis, income growth rate has been slowing.

Yes, PSR accounts for "disposable" income, but that term can be somewhat misleading. Disposable income is simply the net of income minus taxes. It's not necessarily available for discretionary purposes.

I would say that savings rates are quite low right now, and that accordingly, nominal consumption is high. But there's a deeper story there.

http://www.bea.gov/newsreleases/national/pi/pinewsrelease.ht...

I'm having trouble understanding what you're saying here. What's left after saving and spending?

For example, let's say I made 50k in 2008 after taxes and saved 10% (5k), and in 2013 I made 55k, but saved only 5% (2.5k). My PSR went down by 50%. The first conclusion one might make is that I decided to spend more and save less. i.e. I've become more consumptive. However an alternate explanation is that inflation growth has outpaced my income growth, and that I am in fact consuming the same amount (in terms of measurable benefits), but that it costs me more do consume that same amount. So using the example above where my income grew 10%, it is also possible that inflation over the same period increased by 16.67%, outpacing my income growth enough to reduce my savings rate without me making any qualitative increases in my consumption.

Inflation inflates income dollars and cost dollars, because they're both made of dollars.

Are you talking about some kind of consumption that isn't measured in dollars? I'm not talking about the amount of things that people are consuming, I'm talking about the percentage of their income that they are spending on consumption. Whether that buys a can of peas one year and a yacht the next makes very little difference. If during that first year, everybody bought a can of peas, and in the second, everybody bought a yacht, consumption hasn't increased.

In other words, if your savings rate had to lower because you make less money and things are more expensive, your consumption has gone up.

edit: I'm not trying to make a statement about Americans being wild spenders; I'm trying to make a statement about the possibility of a consumption driven recovery. Americans are very close to the limit of the ability that they have to spend more.

Nominal dollar values is but one way to measure consumption.

The original comment I was elaborating on was talking about other factors that can impact PSR without a change in consumption patterns as measured by what goods and services are received not the nominal value spent on them. One important and very real factor is that nominal income growth for most workers has not grown as fast as inflation. On a macro level you're right, but at the individual level it's that mismatch that matters.

I wasn't talking about measuring consumption in dollars but in value received. If I buy a can of peas this year for $1 and a can of peas next year for $1.10 (assuming no factors specific to the peas or can market), then I have consumed the same amount in terms of the benefit I get. You're also right that I've consumed more in terms of nominal dollar values, but nominal dollar values wasn't the measurement stick I was using when I said they consume the same amount.

It's not that there's something left after saving and spending; it's that there are different types of spending. PSR is a useful starting point, but not a complete story, in assessing consumer health and markets.

For instance, it is not incongruous right now to say that a) people are saving proportionately less, and b) people are not buying as much stuff. Obviously they are spending in direct proportion to what they're not saving -- but the categories of their spending matter a great deal.

Tl;dr is I'm not disagreeing with you at all; I'm just expanding.