Compared to previous rounds, U.S. households plan to save more—and spend less—of their third-round stimulus checks, according to an analysis of survey data, putting a potential wrinkle in predictions that the government aid will lead to stratospheric economic growth in the coming months.
Respondents to a survey the Federal Reserve Bank of New York conducted in March planned to save 41.6% of the $1,400-per-person stimulus checks approved last month, more than the 37.1% they intended to save from the $600 payments in December and 36.4% with the first round of $1,200 payments last spring, previous surveys showed. With the latest checks, households planned to spend 24.7% of their latest checks, and use 33.7% to pay down debt, the NY Fed found.
The numbers signal an increasing amount of economic firepower sitting on the sidelines, just as analysts predict the economy will take off in the coming months, fueled by consumer spending. Uncertainty about how long the pandemic will last, high unemployment, and constraints on many activities might be to blame, though the researchers said wallets could open more as these factors fade.
“As the economy reopens and fear and uncertainty recede, the high levels of saving should facilitate more spending in the future,” the researchers wrote. “However, a great deal of uncertainty and discussion exists about the pace of this spending increase and the extent of pent-up demand.”
The first two rounds of direct payments have proven to be a boon to the economy, the researchers said, coinciding with increases in both consumer spending and real personal income.
People have consistently anticipated saving more of their checks than spending, though, with the average spending percentage declining from a high of 29.2% in the first round. Higher-income households tend to save more than lower-income households, while the reverse is true with spending.