Americans are exhausting their excess savings – and could run out funds this quarter, Fed study says

Moe Zoyari/Bloomberg

Americans are burning through their savings and could run out funds as early as this quarter, a Fed study showed. 
As of June, Fed estimates show US households held less than $190 billion of aggregate excess savings. 
With excess savings dwindling, Americans have leaned on their credit cards for spending. 

Americans are exhausting their pandemic savings – and could run out of funds by the end of the third quarter, according to the Federal Reserve Bank of San Francisco. 

Excess savings refer to the difference between actual savings and the pre-recession trend, Fed researchers said.  

As of June, Fed estimates show that US households held less than $190 billion of aggregate excess savings. 

“There is considerable uncertainty in the outlook, but we estimate that these excess savings are likely to be depleted during the third quarter of 2023,” San Francisco Fed researchers Hamza Abdelrahman and Luiz Oliveira said in a blog on Wednesday

They added that government data showed consumers were spending beyond their means during the last quarter of 2022 and first quarter of 2023.

“The Bureau of Economic Analysis recently revised its previous estimates to show household disposable income was lower and personal consumption was higher than previously reported for the fourth quarter of 2022 and first quarter of 2023,” Abdelrahman and Oliveira said. 

“The combined revisions brought down the Bureau’s measure of aggregate personal savings by more than $50 billion,” they added. 

The downbeat forecast comes as Americans prop up the economy through their strong spending habits, helping temper fears that the US could slip into recession. But dwindling savings could pose challenges for the US economy, given consumer spending is a key engine of growth. 

In one sign of falling savings, Americans are using their credit cards more, racking up nearly $1 trillion of such debt, Fed data shows. 

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