- Consumers are about to run out of their excess savings from the pandemic, according to JPMorgan.
- Excess savings peaked in August 2021 at a whopping $2.1 trillion, helped by government stimulus checks.
- But analysts estimated that has been whittled down to just $148 billion as of last month.
Our Chart of the Day is from JPMorgan, which highlights that consumers have significantly spent down their excess savings from the COVID-19 pandemic.
At its peak in August 2021, consumers had a whopping $2.1 trillion in excess savings, in part buffered by stimulus checks from the US government. But those savings have been consistently drawn down and JPMorgan estimated that consumers had just $148 billion left last month.
Amid high interest rates and years of elevated inflation, consumers have relied on their savings to keep up their spending habits. A strong labor market has also helped fuel robust levels of consumption.
But JPMorgan warned that high rates are set to weigh down consumers going forward as their excess savings are fully depleted.
"Consumers are facing tighter credit conditions and rising rates, wind-down of Covid-era stimulus and relief programs, declining excess savings and liquidity, and multiple years of above average inflation," JPMorgan said in a Monday note.
The bank highlighted that US consumers expanded their debt by $2.9 trillion since the pandemic to $17.1 trillion.
That increased debt, combined with big-ticket assets nearing the end of their useful life and need to be replaced, should drive a steady increase in the debt service ratio to the pre-Great Financial Crisis level of about 12%.
"The sunset of government stimulus and relief programs and diminishing savings should result in higher delinquency rates and charge-offs in coming quarters," JPMorgan said.