In a stunning reversal of pandemic-era patterns, Americans’ savings dropped 63.5% between 2021 and 2022 to levels last seen in 2013. Numbers released this week by the Bureau of Economic Analysis and the St. Louis Fed show that U.S. household savings stood at just over $800 billion last year as the cost of living crunch was hitting the nation hard and some Covid-19 government aid was discontinued.
During the beginning of the Covid-19 pandemic, household savings in the U.S. soared to never-before-seen heights, almost doubling between 2019 and 2020. As restaurants and entertainment venues closed, travel was restricted and everyone in the country was told to stay at home, Americans inadvertently cut down on their spending and padded their savings. Sadly, it wasn’t to last.
This chart shows the annual change in household savings and debt in the U.S. (in percent)
Between 2013 and 2019, U.S. household savings—which are considered low in an international comparison—had been growing quite steadily, but all this progress plus the pandemic spike was wiped out in the span of just two years. Meanwhile, U.S. household debt has accelerated its growth since 2021, now increasing by more than 6% annually, up from around 3% in previous years. The nation’s household debt, which includes nonprofits’ debt, debt securities, loans and liability, reached a grand total of just over $19 trillion last year, far exceeding savings.
2023 could see a further escalation of this trend as inflation remained elevated for much of the year and more pandemic-related measures expired, most notably the student loan repayment pause. The New York Times
NYT
“Only-in-the U.S. phenomenon”
The Federal Reserve Bank of New York in October identified the development as an “Only-in-the U.S. phenomenon”. While in other high-income economies excess savings as a share of disposable incomes grew in 2020 and 2021 and remained stable in 2022 and 2023, they have been decreasing again in the United States. Likewise, while the savings rate of the Euro area returned to pre-pandemic levels after 2022, it dropped below these levels in the U.S., meaning that the size of pandemic savings is not being sustained in the country. Other nations outside the Eurozone after 2022 even stuck with saving rates substantially higher than before the pandemic, for example the United Kingdom, Japan and Canada.
While the appetite for spending among U.S. consumers is part of the reason U.S. GDP recovered so well after the pandemic, there are of course also negative implications for Americans’ financial security and preparedness. The country is once more proving its willingness to spend big and not be deterred by uncertain economic conditions and inflation eating into real disposable incomes. Unlike residents of other developed nations, Americans have continued on their pre-pandemic spending trajectory despite the inflation crisis that is making money notably tighter globally in real terms.
For U.S. consumers, their pandemic savings seem to have accumulated just at the right time to tide them over the current state of the economy as they once again demonstrate how different to other countries their attitudes towards financial matters are.
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Charted by Statista
