The excess savings that Americans built up during the first couple years of the pandemic are due to be exhausted at some point. But when?
In 2022, economists expected the extra savings stock to be much more resilient than it actually was. It dropped from $2.3 trillion to $1.2 trillion over the course of the year, according to Federal Reserve data.
“I don’t think anyone anticipated Russia invading Ukraine,” says Ryan Sweet, chief US economist at Oxford Economics. The resulting spike in gas and food bills then “caused a lot of low-income households and middle-income households to dip into their excess savings.”
Deutsche Bank analysts now expect the savings pile to run out by the third quarter 2023, while the slightly more optimistic analysts at JPMorgan Chase see it being exhausted by the end of the year.
Sweet, however, says it’s unlikely that the excess savings stock will be depleted in 2023, since the majority of the extra savings are now held by rich Americans, who would treat it like wealth instead of cash.
Generally, rich Americans spend less of their savings than poor Americans, and
But the excess savings stock for low- to middle-income Americans will disappear in 2023, Sweet says, as rent, food, and energy inflation push them into spending more.
Related: US housing in 2023 won’t be a buyer’s market or a seller’s market.
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