U.S. Consumption after the 2008 Crisis

U.S. household consumption declined sharply in late 2008, marking a departure from thetrend of a steady increase in U.S. consumption as a share of income since the 1980s.Combining econometric and simulation analysis, we estimate that this departure will besustained beyond the crisis: the U.S. household consumption rate will likely declinesomewhat further from its current level, as the saving rate rises to around 6 percent ofdisposable personal income (from nearly 5 percent in 2009). Compared to the pre-crisisyears (2003–07), this saving rate implies a decline in U.S. private-sector demand on theorder of 3 percentage points of GDP.