The trillions of dollars in excess personal savings built up by Americans during the pandemic are beginning to vanish amid high inflation, according to Federal Reserve economists.
The monthly saving rate fell to a 15-year low in 2022, and it has only started to recover in 2023. However, it remains well below long-term trends.
Despite this slowdown in saving, consumer spending has remained robust, keeping the U.S. from recession.
“Something like $2 [trillion] to $2.5 trillion above what we would have otherwise expected were saved by American households,” said Curt Long, chief economist at the National Association of Federally-Insured Credit Unions.
Collectively, Americans have trillions in excess savings compared with expectations leading up to the pandemic, according to Federal Reserve economists.
There are a number of factors that have contributed to the decline in Americans' savings. One is the rise in inflation, which has made it more expensive to buy goods and services. Another is the reopening of the economy, which has led to increased spending on travel, dining out, and other activities.
It is unclear how long the decline in savings will continue. Some economists believe that it will level off as inflation comes down. Others believe that it will continue as consumers adjust to the new normal of higher prices.
Regardless of what happens, the decline in savings is a sign that Americans are facing financial challenges. It is important for consumers to be aware of their financial situation and to make sure that they are prepared for the future.
Video Credit: CNBC
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