As they do not know when the Epidemic will end, the American people who are saving for a rainy day would rather put their money in the bank than open their wallets and spend heavily, which also pushed up the personal savings rate to 20.5% in January, writing the highest record since May 2020.
According to the Commerce Department’s recently released January personal income and expenditure report, benefiting from the latest round of bailout cash checks, the U.S. people’s income seasonally adjusted to a strong increase of 10% over the previous month, but at the same Time spending only increased slightly by 2.4%. In addition, savings as a share of after-tax income, that is, the personal savings rate rose sharply from 13.4% in the previous month to 20.5%, the highest since May 2020. Before the epidemic, the only time the savings rate was even higher was during World War II.
However, the high savings rate not only comes from the government’s bailout funds, but also from the epidemic’s impact on the public to reduce dining out and vacation, resulting in a significant weakness in service spending. The Commerce Department reported that spending on services, which accounts for about two-thirds of consumer spending, was down 5.3 percent from a year ago.
However, since the outbreak of the epidemic, the savings rate of the U.S. public has gradually increased, which has also increased a lot of cash for the balance sheet of U.S. households. The Federal Reserve Board said that by the end of the third quarter of 2020, U.S. households will have $2.2 trillion more in cash and cash equivalents than they did at the end of 2019. However, with a new round of government bailouts expected to hit the road soon, the figure will undoubtedly be even higher.
The survey also found that in absolute terms, high-income Americans have the most savings. This means that once the epidemic eases, these high-income people will be more willing to open their wallets and spend.
In addition, people with moderate income also increased their savings significantly. According to an analysis by JP Morgan economists of the 1.8 million households with checking accounts at banks across the U.S., by the end of October 2020, the median assets and liabilities of these households will be 40% higher than a year ago. For the bottom quarter of households, median assets and liabilities are up 45% annually.
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