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It turns out that consumers have more extra savings than economists believed. The latest GDP data indicate Americans have a combined $1 trillion more in savings than what they likely would have had without the jump that was caused by the pandemic when the government sent out multiple rounds of stimulus checks, and people had fewer opportunities to spend money.
That cash hoard has been falling, leading to expectations that consumer spending is bound to take a hit sometime soon. Now it looks like consumers, collectively, are not so close to being tapped out.
However, don’t expect all of those extra savings to get spent. Much of it is in the hands of wealthy consumers, who have likely invested the money or plan to do so. Still, the extra financial cushion will add a bit to GDP growth next year and in 2025.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
