U.S. Households now burning through whats left of their "Pandemic savings"

The cushion of savings many built up during the pandemic is thinning out. In some households, it is already gone.

Americans have spent down about 35% of the extra savings they accumulated during the pandemic as of mid-January, according to an estimate from Goldman Sachs. By the end of the year, the company forecasts that they will have exhausted roughly 65% of that money.

In 2020 and into 2021, a combination of government pandemic stimulus and reduced spending, for example on restaurants and travel, fattened Americans’ wallets. Households amassed $2.7 trillion in extra savings by the end of 2021, according to Moody’s Analytics.

This cash helped Americans make it through a period of high inflation last year, but the forces that had acted to boost savings reversed direction as pandemic relief unwound and prices soared.

Today, some people are having to cut back on their spending or add to their credit-card balances. Many have had to tap their savings to stay afloat, say economists.

“At the exact same moment you lost the government transfer payments, you got hit with very high inflation, which made your real spending power lower,” said David Mericle, Goldman Sachs’s chief U.S. economist.
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