Americans' dwindling ‘excess’ pandemic savings could hurt chances of US economy's soft landing
KB Advisory founder Kristin Bentz discusses whether the U.S. economy is starting to see cracks in consumer spending on Making Money.
American consumers are depleting the «excess savings» they accumulated during the COVID pandemic, which could hamper the U.S. economy’s ability to achieve a soft landing as the Federal Reserve continues to fight inflation.
Amid the COVID pandemic, the federal government shelled out trillions of dollars in financial support for consumers and businesses intended to stabilize the economy amid shutdowns and supply chain disruptions. The influx of cash increased the amount of money many American households in the bank above pre-pandemic trends in savings, which is why economists refer to those funds as «excess savings.»
Americans’ excess savings from the pandemic peaked at about $2.1 trillion in August 2021 but fell to roughly $500 billion as of this spring, according to estimates by economists at the Federal Reserve Bank of San Francisco.
The economists suggested that the remaining savings could support consumer spending into the fourth quarter, but noted that «uncertainty surrounds this outlook, including the possibilities that households may now have a higher appetite for savings, significantly shift their spending habits, or receive other sources of income that offset the expired pandemic-era cash flows.»
MINNEAPOLIS FED CHIEF KASHKARI HOPEFUL US ECONOMY CAN AVOID RECESSION AS INFLATION FIGHT CONTINUES
Americans' excess savings accumulated during the pandemic are being depleted which could make it harder for the U.S. economy to have a «soft landing» from the inflationary cycle. (AP Photo/Nam Y. Huh / AP Images)
A separate report by Federal Reserve economists who specialize in
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