- Households in the US accumulated unprecedented levels of excess savings during the pandemic recession.
- This excess savings peaked at $2.1 trillion in August 2021, but has since been depleted by $1.9 trillion as of June 2023.
- As of June 2023, there is less than $190 billion of excess savings remaining in the aggregate economy.
- If the recent pace of drawdowns persists, aggregate excess savings would likely be depleted in the third quarter of 2023.
- The rapid accumulation and subsequent drawdown of excess savings following the onset of the pandemic recession contrasts starkly with prior recessions.
- Estimates of aggregate excess savings are filled with uncertainty because they are highly sensitive to the methodology used and the assumptions made about the pre-pandemic trend.
- Despite differing methodologies and assumptions, the existing body of work on household savings following the pandemic recession firmly points to the rapid accumulation and drawdown of excess savings in the United States.
Here are some additional points that are not explicitly mentioned in the passage:
- The depletion of excess savings is likely to be a major factor in the slowdown of economic growth in the third quarter of 2023.
- The depletion of excess savings could also lead to higher inflation, as households compete for a limited supply of goods and services.
- The distribution of excess savings across households is also a matter of uncertainty. Some households may have already spent their excess savings, while others may still have a significant amount of money saved. This could lead to different spending patterns among households, which could further complicate the economic outlook.
Source:https://www.frbsf.org/our-district/about/sf-fed-blog/excess-no-more-dwindling-pandemic-savings/
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