Saving Rate Falls as Stimulus Fades, Spending Increases

Off the Charts: The Visual Says It All

Waiter serving family in restaurant
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Saving rates have fallen sharply after initially surging at the onset of the pandemic, partly because government support is dwindling and consumers are back to doing what they do best—consuming, economists said.

In August, the personal saving rate dropped to 9.4% from 10.1% in July, according to the latest report from the Bureau of Economic Analysis. The level is well below the record 33.8% saving rate in April 2020, around the start of the pandemic, but remains above pre-pandemic levels, as the chart below shows.

The falloff in saving isn’t surprising. People have more options for spending with the reopening of the economy. During government shelter-in-place orders, many people who were stuck at home shopped online and saved the rest of their stimulus checks.

“People were limited before to buying stuff on Amazon, physical stuff,” said James Knightley, chief international economist for ING. “With the reopening, they have more options like dining out or travel.” 

The saving rate may fall still further, he said, but spending that once was supported by government checks will be replaced by private income like investments and wages, which should keep the economy chugging along. “Incomes were rising from stimulus checks, but that dropped away. The good news is income from private sector sources is growing sharply,” Knightley said. “So there’s hope spending will keep growing because private sector income is more sustainable. I think we can look forward to a solid economy.”

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