Discussion Paper

Spending Down Pandemic Savings Is an “Only-in-the-U.S.” Phenomenon

Abstract: Household saving soared in the United States and other high-income economies during the pandemic, as consumers cut back on spending while government policies supported incomes. More recently, saving behavior has diverged, with the U.S. saving rate dropping below its pre-pandemic average while saving rates elsewhere have remained above their pre-pandemic averages. As a result, U.S. consumers have been spending down the “excess savings” built up during the pandemic while the excess savings abroad remain untapped. This divergent behavior helps explain why U.S. GDP has returned to its pre-pandemic trend path even as GDP levels in other high-income economies continue to run well below trend.

Keywords: savings; saving rate; consumer spending; consumption; disposable income; excess savings; growth; pandemic; post-pandemic;

JEL Classification: E2; F00;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2023-10-11

Number: 20231011