Introduction to Finance

Table 7.2
shows the sources of saving in the United States. Net saving is the sum of net private 
saving (primarily personal saving and undistributed corporate profi ts) and net government 
saving (federal, and state and local). For 2015, net saving was $484.4 billion, the result of net 
private saving of $1,168.2 billion and net government saving of –$683.8 billion. Net saving 
also can be estimated as gross saving ($3,340.0 billion) less the consumption of fi xed capital 
($2,855.7 billion). In comparison, gross saving was nearly $2.2 trillion in 2006 with net sav-
ing being $513.7 billion. For 2008, net saving was –$23.0 billion due to net private saving of 
about $659.8 billion while net government saving was –$682.7 billion. These diff ering results 
between 2006 and 2008 refl ect the 2007–08 fi nancial crisis and the 2008–09 recession. Neg-
ative net saving also existed in 2011 before turning positive in 2015.
Personal saving by individuals provided a $678.3 billion in net saving in 2015, which 
represented about 58 percent of net private saving. Corporate profi ts that were not distributed 
to owners amounted to $749.1 billion in 2015. Total corporate saving is composed of undistrib-
uted corporate profi ts plus adjustments for corporate inventory valuation and capital consump-
tion. Inventory valuation adjustment amounted to $69.7 billion in 2015. 
Capital consumption 
adjustment
, also called depreciation, is the estimate of the “using up” of plant and equipment 
assets for business purposes. These allowances amounted to –$329.0 billion in 2015. The com-
bined total of the three sources of corporate saving amounted to $489.8 billion in 2015. 
Personal savings increased consistently over the four years (2006, 2008, 2011, and 2015) 
presented in Table 7.2. In contrast, the level of undistributed corporate profi ts decreased in 
2008 relative to 2006 due the fi nancial crisis. The amount of undistributed corporate profi ts 
then increased rapidly by 2011 due to the economic recovery that benefi ted from the Fed’s 
easy money policies. Undistributed corporate profi ts were only a little higher in 2015 relative 
to the 2011 level, in part due to slower economic growth in 2015 associated with an increase 
in the value of the U.S. dollar relative to most other currencies. We will examine the roles of 
personal and corporate saving as providers of funds for investment in greater detail later in 
this chapter.
As Table 7.2 shows, the consumption of fi xed capital comes primarily from the private 
sector. In 2015, consumption of fi xed capital was more than $2.8 trillion with private sector 
consumption being about $2.3 trillion and the government sector share only about $526 billion. 
Domestic business accounted for about 80 percent of private sector consumption in 2015, with 
households and institutions making up the remainder. 
Gross savings leads to gross investment. Table 7.2 shows that most of the gross domestic 
investment of more than $3.6 trillion in 2015 was in the form of $3.0 trillion in gross private 
domestic investment. Personal saving and undistributed corporate profi ts accounted for most 
of the net private savings of nearly $1.2 trillion.

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