US savings rate hits lowest level since 2008, economists say Americans have “excess savings” that will provide a buffer

As inflation spirals out of control and pandemic-related stimulus dwindles, Americans are finding it increasingly difficult to save money.

Last April, the private savings rate in the US fell to 4.4%. This is the lowest reading since September 2008, according to the US Department of Commerce, Yahoo Finance reported.

“In a typical cycle, a sharp decline in the savings rate would be a warning sign of the sustainability of spending,” Wells Fargo economists led by Tim Quinlan wrote in a public statement last week.

The statement continued: “Because the balance sheets are in better shape, we see less cause for concern today. In fact, our baseline forecast is for the savings rate to fall below its previous cycle average of 7.2% by the end of 2023.”

The Personal Savings Rate is a dataset most impacted by the government’s efforts to prop up the economy through the COVID-19 pandemic. For some time, a sharp decline in Americans’ ability to save has been expected.

In April 2020, the savings rate hit a record 33.8% as government economic reviews gave consumers some much-needed relief as the nationwide response to COVID-19 kept many people at home and forced businesses to close.

Economists believe there are trillions of dollars in untapped savings that Americans can use to stay afloat, even as a rapidly growing number of Americans are unable to contribute to their savings and grow their nest egg.

Pantheon Macroeconomics’ Ian Shepherdson said it was “no big deal” if Americans were no longer able to save their incomes.

The macroeconomist said: “The stock of excess savings is still $2.2 [trillion]and the rundown over the past three months has averaged just $41 [billion] per month.”

Shepherdson continued: “It may go on for a long time, but it will not be necessary as real incomes start to pick up again in the second half of the year [of 2022].”

Wells Fargo economists recently estimated that US consumers have about $2.3 trillion in savings, which they termed “excess savings.” This label denotes savings that go beyond pre-pandemic wheat trends, which have shown the American public they can save.

These economists noted, “Households have an estimated $2.3 trillion (non-annualized) on their balance sheets, and household net worth has increased about 30% over the past two years through the fourth quarter. This overall increase in net wealth applies to all wealth percentiles and leaves households in a relatively better financial position than after past recessions.” US savings rate hits lowest level since 2008, economists say Americans have “excess savings” that will provide a buffer

Laura Coffey

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