Benchmark Revisions and the U.S. Personal Saving Rate

Abstract

Initially published estimates of the personal saving rate from 1965 Q3 to 1999 Q2, which averaged 5.3 percent, have been revised up 2.8 percentage points to 8.1 percent, as we document. We show that much of the initial variation in the personal saving rate across time was meaningless noise. Nominal disposable personal income has been revised upward an average of 8.4 percent: one dollar in 12 was originally missing! We use both conventional and real-time estimates of the personal saving rate to forecast real disposable income, gross domestic product, and personal consumption and show that the personal saving rate in real-time almost invariably makes forecasts worse. Thus, while the personal saving rate may have some forecasting power once we know the true saving rate, as Campbell (1987) and Ireland (1995) have argued, as a practical matter it is useless to forecasters.