Baby Boom Briefing

Consumer spending resilience increasingly has become a balance-sheet story rather than an income-statement story. The personal saving rate has been falling since January 2024 as consumer outlays have outpaced disposable personal income (chart). Many economists believe that this is unsustainable. Not us.

We think that the saving rate will turn negative by the end of the decade as retiring Baby Boomers finance their spending with their sizeable net worth. Indeed, there is a clear inverse correlation between the personal saving rate and the ratio of household net worth to disposable personal income (DPI). As household net worth increases relative to DPI, consumers tend to save less of their DPI.