Millennials saving their money could be to blame for a sluggish economy, according to a note a Raymond James analyst wrote to clients, reports CNBC.
The U.S. personal savings rate has increased from 5.7 percent in 1996 to 8.1 percent in 2019, according to the St. Louis Federal Reserve.
The rate, according to Raymond James analyst Tavis McCourt, “has had disinflationary impact, driving the relatively slow growth and low inflation in this recovery ... causing the incentives for excess supply, and disinflation/deflation biases in the global economy.”
A slowdown in spending hurts businesses, which in turn hurts the U.S. economy.
“This leads to frustratingly low growth, deflationary biases in prices, excess supply, and increasing debt from the supply side attempts to improve the situation because the savings rate is going higher,” he said.
Millennials, who came of age during the Great Recession and were born between 1981 and 1996, started to save more following the 2008 financial crisis.
“The U.S. consumer has had enough, so they are saving instead of purchasing like last generation, limiting demand growth,” added McCourt.
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