The U.S. economy is fueled by consumer spending, and Americans have done the nation proud over the past years.
Unlike citizens of other developed countries, Americans today are saving less than they were before the pandemic, according to research from the New York Fed .
Savings Down, Spending Up
Before Covid, the average American household saved more than 6% of their disposable income. During the pandemic, those savings jumped up to 13.6%, boosted by stimulus checks, and fewer opportunities to spend while the economy was shuttered. Since 2022, however, the savings rate hasn’t reverted back to its pre-pandemic level. Rather, it fell further, to only 4% of disposable income.
Savings patterns in countries like the United Kingdom, Japan, and Canada have been a lot less volatile over this period.
During the pandemic, many families received a windfall of stimulus payments, which contributed to the skyrocketing savings rate. However, psychologically, consumers may not have considered this cash “earned” and as such may be more willing to spend it freely. On top of that, the historically strong labor market may have given people the added confidence to keep spending.
Another reason to spend big: Things have gotten more expensive. High inflation drove up the cost of everything, meaning people had to spend more overall to keep their consumption the same.
Even so, consumer spending helped the economy stay on track, as spending contributes more than two-thirds of U.S. GDP.
Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.