Check the deposits

During the pandemic, personal saving rates spiked driven by a combination of consumer caution, travel restrictions, and an influx of government stimulus. In the US, the change in the savings rate relative to the pre-pandemic trend resulted in an estimated USD 2.1 trillion in accumulated excess savings at its peak in August 2021 according to the Federal Reserve Bank of San Francisco. However, a note published this month by the US Federal Reserve Board of Governors indicates that in the US the excess savings buffer has been “completely depleted” while households in other advanced economies still hold an excess savings buffer in the range of 3 to 5 percent of GDP. Although this finding appears worrisome, as the Fed’s note this month points out, there is not a standard method for calculating excess savings. With this in mind, it may be useful to consider the total balance on its own, rather than an estimate of the excess. As of the end of first quarter of 2023, total US household checkable (liquid) deposits were USD 4.18 trillion, down from USD 4.46 trillion in 3Q22, but still well above the USD 980 billion in pre-pandemic 4Q19. To paraphrase Mark Twain, reports of the demise of US savings, may be greatly exaggerated.

Source: US Board of Governors of the Federal Reserve System, June 2023