The Household Saving Rate shows how much Households are saving for the long term and how much they are spending on the day-to-day. The Saving Rate is Gross Saving as a percentage of Gross Disposable Income.
If the Saving Rate goes up it indicates that Households are adding more of their income to their wealth, while if it goes down it indicates a switch to current expenditure over building up wealth.
As we saw Gross Saving is after Final Consumption Expenditure (FCE) of Households has been subtracted from Gross Disposable Income. A few examples will help to understand the relationship between these economic measures. In 2020, the Saving Rate went up because overall incomes held steady while expenditure declined sharply. When income declines but FCE declines faster, then the Saving Rate will also go up, and this happened in Ireland in 2009 as the recession hit and uncertainty led to 'precautionary saving' as people reduced their spending faster than their incomes declined. If income goes down but FCE stays the same then the Saving Rate will decline: this happened in Ireland when the domestic economy was contracting between 2009 and 2013 as people has less spare for saving. If income increases faster than FCE then the Saving Rate will go up, and this happened in Ireland between 2014 and 2019 as Ireland came out of recession.
As for gross saving, a high Household Saving Rate indicates households are making money available for capital investment, which is a positive indicator for long term growth in the economy as a whole.
