JPMorgan last week made the call that US pandemic savings have finally run out.
“Excess savings for US households when adjusting for inflation are now fully exhausted from a 2021 high of $2.1 trillion,” JPM said.
Retailers have been highlighting how low-end consumers have cut back and that same cohort was struggling in today’s consumer confidence survey. However I think much of the excess savings accumulated in the higher income brackets. Could that consumer also be about to cut back?
I’d guess they’re more sensitive to the economic cycle and newspaper headlines. For that to happen, they might need to see a recession coming and with a whipsaw in that department already this year, they might be skeptical. Does a weak non-farm payroll report change that? Maybe.
There’s also a school of thought that’s probably domainant right now that says excess savings don’t matter. I’d be humble about that opinion as I’ve long feared we could have a Wile E Coyote moment with the US consumer as pent-up pandemic spending ends.