Many studies of household consumption and saving behavior link current consumption to both current income and expected future income as households appear to smooth spending in response to fluctuations in income.4 One consequence of this behavior is that the ratio of consumption to current income will be higher - and hence the personal saving rate will be lower - the higher is the expected growth rate of future income.
So to the extent that households have taken note of the step-up in productivity growth over the past decade and have assumed that it means more rapid increases in future income, their saving rate would fall. This belief in “better economic times ahead” increases the confidence of households about their future income prospects and encourages them to be less thrifty today.