The Decline of American Savings

by Warren Seah

Recent surveys and data suggest that Americans are facing a concerning shortage of savings. According to a New York Fed survey, the average likelihood of a credit applicant needing $2,000 within the next month has reached its highest level since February 2021. In contrast, the average likelihood of being able to come up with $2,000 has dropped to its lowest level since February 2022.

These disconcerting findings highlight the weakening state of American finances. In fact, the combined results of the two surveys represent the weakest performance in the New York Fed’s eight-year history, further emphasizing the severity of the situation.

Another indicator of depleting savings comes from a Federal Reserve Board paper. The findings suggest that excess savings have been significantly reduced in recent months. This deterioration in households’ financial situations raises concerns about future consumption. Given that several factors are already expected to hinder spending by the end of the year, there is an increased probability of a recession.

The troubling outlook extends beyond surveys and papers. Jackie Rogowicz, an investment analyst at Penn Mutual Asset Management, draws attention to the Johnson Redbook index of same-store sales growth, which has turned negative for the first time since March 2020. This trend is especially worrisome as retail companies prepare to report their second-quarter earnings. Rogowicz cites Levi Strauss’s lowered revenue guidance and luxury giant Richemont’s missed revenue target as telling examples of the challenges faced by companies across income brackets.

As Americans continue to grapple with diminishing savings, there is a growing urgency to address this issue and find ways to bolster financial security for individuals and households alike.

You may also like

Leave a Comment