"FOR THE past year the success of America’s economy has rested on three pillars: a healthy labour market, falling inflation and robust spending fuelled by savings accumulated during the pandemic. This last pillar may be starting to give way. Researchby Hamza Abdelrahman and Luiz Oliveira of the Federal Reserve Bank of San Francisco suggests that Americans have burned through more than 90% of the “excess savings” they amassed in 2020 and 2021. What little remains, the economists estimate, is
During the pandemic stimulus cheques and other government support boosted personal incomes by more than $1trn, while lockdown restrictions reduced Americans’ spending by another $1trn. As a result, monthly personal savings swelled from around 9% ofincome in 2019 to more than 30% in the spring of 2020, and 20% during the Alpha and Delta waves of the pandemic the next year. All told, Americans accumulated excess savings—the amount above what would be expected from pre-pandemic trends—of around $
But data from the Bureau of Economic Analysis, a government agency, show that by June 2022 America’s personal-savings rate had plummeted to just 2.7%. Although the rate has ticked up slightly since then—in June households squirrelled away 4.3% oftheir incomes—it remains well below pre-pandemic levels. There are signs that a growing number of households are financially stretched. "
https://www.economist.com/graphic-detail/2023/08/21/americas-pandemic-savings-are-running-outluxurious but otherwise not needed items. They would also seek out low cost needed items. But it does not necessarily limit consumers' total spending if their saving is still substantial.
In comparison to consumer sentiment, household saving is a lot more fundamental. Regardless of sentiment, depleted saving will limit future spending to income without borrowing. In contrast, low consumer sentiment would limit people to spend on
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