Americans saved hundreds of billions more than previously thought

investmentnews.com:

Reports of the demise of excess U.S. household savings were greatly exaggerated. Revised government data indicate that Americans have hundreds of billions of dollars more in extra cash stashed away than previously believed. 

“It definitely raises the prospects of a soft landing pretty significantly,” Citigroup Inc. senior global economist Robert Sockin said. He puts the odds of a soft landing at around 50-50, after previously viewing a recession as more likely than not.

Sockin reckons that households have about $1 trillion in excess savings remaining — a tally in line with a growing number of estimates. That still-large stockpile, some 3½ years after the first fiscal rescue package, may offer a cushion for the economy in the face of headwinds including a surge in bond yields that’s raising borrowing costs for households and companies.

Americans were able to build up a savings cushion during the pandemic, in part as a result of large government support, but have since seen that eroded by elevated inflation and a return to more normal spending patterns as fears of Covid faded.

Economists’ estimates of excess savings hinge on their assessment of the underlying trend in the savings rate. The lower the perceived trend prior to the pandemic, the bigger the bundle of extra savings built up during the virus crisis.

In its comprehensive update of national economic data at the end of last month, the Bureau of Economic Analysis revised down calculations for household savings to reflect a change in how it accounts for income from mutual funds and real estate investment trusts. The bulk of those revisions occurred prior to the pandemic.

As a result, the household savings rate was lowered to an annual average of 6.5% from 2017 through