US Growth: Household savings rate falls again, fiscal deficit remains large

Taking a step back, dissaving from the household and government sectors remains a structural support for US corporate profits and overall activity.

Per the Kalecki-Levy framework, the post-covid cycle has been characterized by a large fiscal deficit and low household savings rates, which have helped to prop up profit margins. The latest data show this is still the case.

In the immediate aftermath of Liberation Day, we saw a jump in the household savings rate to 5% and a negative fiscal impulse, both of which would undermine this structural tailwind if they persisted.

That said, both were short-lived. The latest household savings rate has fallen back to 4.4% (in line with post-Covid averages). Meanwhile, the fiscal deficit remains large at 6.4% and the fiscal impulse is close to zero.

Taken together, these imply the drivers of high consumption and corporate profits remain in place and corroborate a slowing but resilient growth outlook for the US.