The Week in Review: December 4, 2023
Pandemic Savings: How Much Remains to Fuel Economic Growth?
The savings rate soared during the pandemic. The government was generous with cash payments, and most of us had limited opportunities to spend.
Eventually, these payments ended while spending jumped as the economy reopened and inflation soared.
The graphic below highlights the journey. The first spike in April 2020 came amid payments from the CARES Act. The spike in January and March 2021 came amid 2 stimulus bills.
But what’s left in savings from government payments?
It’s an important question because “excess savings” have helped fuel spending and economic growth.
And that cash has helped blunt the negative impact of Fed rate hikes, playing a role in spoiling recession forecast from last year.
Using the latest data, we think there is roughly $1 trillion in cash in the hands of individuals remaining from stimulus checks, but estimates vary wildly.
The Big Question
That’s a lot of dry powder to fuel economic growth. But will any savings that may remain really boost growth?
Some folks may simply hang on to those dollars, using them as a rainy-day fund. Spending doesn’t increase, but cash is available if economic conditions deteriorate, potentially softening any blow to the economy.
If they do, there is not much more those dollars can do to fuel more economic growth.
Market Summary
Two For the road
Walmart’s physical footprint is unmatched, with enough floor space in stores in the United States alone to accommodate some 12,500 football fields. - Chartr, November 19, 2023
With an average age of 78, the Rolling Stones are hitting the road again in 2024 with a 16-city tour. It is being sponsored by AARP (seriously). - AARP, November 21, 2023
Please do not hesitate to contact me if you have any questions or concerns.
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