The US savings rate is at its lowest since 2008, and economists say Americans have “excess savings” that should provide a buffer

With inflation spiraling out of control and pandemic stimulus drying up, Americans are finding it increasingly difficult to save money.

Last April, the personal savings rate in the United States fell to 4.4%. According to data from the US Department of Commerce, that measure is the lowest since September 2008, according to Yahoo Finance.

“In a typical cycle, a sharp decline in the savings rate would be a warning sign about the sustainability of spending,” Wells Fargo economists, led by Tim Quinlan, wrote in a public note last week.

The note continued, “As balance sheets are in better shape, we see less cause for concern today. In fact, our primary expectation is actually for the savings rate to fall below the previous cycle average of 7.2% through the end of 2023″ .

The personal savings rate is a data series that is one of the most adversely affected by government efforts to boost the economy through the COVID-19 pandemic. For some time it was expected that there would be a sharp decline in the amount of money Americans were able to save.

In April 2020, the savings rate hit a record high of 33.8% as government stimulus checks provided consumers with much-needed relief as the national response to COVID-19 kept many people at home and forced businesses to close.

Economists believe there are trillions of dollars in unused savings that Americans can use to keep themselves afloat despite an increasing number of Americans who are unable to contribute their savings and grow their nest eggs.

Ian Shepherdson of Pantheon Macroeconomics said Americans’ inability to save their earnings “didn’t matter”.

The macroeconomist said, “The stock of excess savings is still $2.2 [trillion]The average loss over the past three months was just $41 [billion] Per month.”

Shepherdson continued, “This could go on for quite some time now, but it won’t be necessary as real income will start to rise again in the second half.” [of 2022]. “

Wells Fargo economists recently estimated that American consumers have about $2.3 trillion in savings that they describe as “excess savings”. This designation refers to savings beyond wheat in pre-pandemic trends that demonstrated the ability of the American public to save.

These economists noted, “Households have amassed an estimated $2.3 trillion (non-annually) in their budgets, and household net wealth has increased by about 30% over the past two years during the fourth quarter. This overall increase in net wealth is true across wealth percentages and leaves households in a position My finances are relatively better than they have been after previous recessions.”