American Consumers Exhaust $2.1 Trillion Pandemic Savings; Spending Persists Despite Inflation
According to newsnationnow As of March 2024, American households have fully depleted the excess savings they accumulated during the COVID-19 pandemic, according to new estimates from economists at the Federal Reserve Bank of San Francisco.
Despite this depletion, consumer spending has remained robust in recent months, raising questions about what is sustaining this continued demand.
Earlier findings by the economists showed that U.S. households rapidly built up an unprecedented level of savings during the early months of the pandemic, fueled by government stimulus programs and fewer spending opportunities. This surplus of savings peaked at $2.1 trillion in August 2021.
Since September 2021, households have steadily drawn down their excess savings at an average rate of $70 billion per month. This pace accelerated to around $85 billion per month starting last fall, according to the analysis.
However, even with this pandemic windfall now exhausted, consumer spending on goods and services has continued to remain surprisingly strong, despite the pressures of high inflation and rising interest rates. The economists attribute this persistent demand to several potential factors:
- A strong job market, with unemployment near historic lows, record-high employment, and steady wage growth
- Access to non-pandemic savings or less liquid assets, such as home equity
- Increased borrowing via credit cards and personal loans, though at higher interest rates
While estimates of excess savings come with a degree of uncertainty, most research confirms a rapid buildup followed by a gradual depletion of this financial cushion in the U.S.
Even with the buffer now gone, economists suggest that consumer spending could remain elevated as households continue to leverage employment, accumulated wealth, and debt to fuel their purchases.
