U.S. Consumers Tap Into Pandemic-Era Savings

The boom in the personal savings rate is over, and formerly flush bank accounts are dwindling.

February 08, 2023

Due to pandemic-related restrictions and government stimulus, U.S. households amassed an estimated $2.7 trillion in extra savings by the end of 2021, according to Moody’s Analytics. But Americans now are spending more and saving less, eating into those pandemic-fueled reserves.

The Wall Street Journal reports that, according to Goldman Sachs, about 35% of those extra savings have been spent. That figure could be 65% by the end of 2023.

“At the exact same moment you lost the government transfer payments, you got hit with very high inflation, which made your real spending power lower,” David Mericle, Goldman Sachs’s chief U.S. economist, told the Journal.
In November, the Journal reported that one factor reducing the personal saving rate is consumers spending on experiences they missed out on during the pandemic.

The U.S. personal saving rate has swung dramatically the past few years. From 2016 to 2018 it grew slowly from 7.0% to 7.6%. In 2019, the rate was 8.8%, before it spiked to 16.8% in 2020 and 11.8% in 2021.

The rate plummeted to 3.3% in 2022. The Journal reports that higher-income households remain relatively flush, while lower-income households have been hit particularly hard by the changing economic conditions.

In addition, credit-card debt has spiked. In the fall of 2022, the average debt was $5,474, a 13% increase from a year earlier.

Although inflation has cooled, dwindling nest eggs and rising consumer debt will continue to put pressure on U.S. consumers. Check out “The Pinch of Inflation” from the September 2022 issue of NACS Magazines for ideas about how to survive a period of economic turbulence.