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Consumers’ Excess Savings May Make Up For Lack of Stimulus
October 13, 2020
With Congress deadlocked on another stimulus package, some economists worry that consumer spending may fall, throwing the economic recovery off track. The good news, however, is that Americans have been saving more than ever during the pandemic, and may be enough to counteract the lack of additional aid.
Morgan Stanley estimates that American households have saved an extra $1.1 trillion as of August, as compared to pre-pandemic savings. Much of this can be attributed to the previous round of stimulus spending, as many Americans opted to put their $1200 stimulus checks and additional $600 unemployment payments in the bank. Furthermore, during the lockdown, Americans were spending less.
While the excess saving rate peaked in April and has steadily declined, Morgan Stanley says the months of high savings may provide a buffer that will allow consumer spending to remain robust in the coming months, even if Congress fails to pass additional relief.
