US households are tapping into savings at the fastest pace in years.
Personal savings rate dropped to 4.1% in August — lowest since late 2021. That's a 1.6 percentage point decline just since January.
Outside of the 2022 inflation spike, we haven't seen savings this thin since 2008. The 5-year average is now 5.4%, also a 14-year low. Pre-pandemic normal was around 6%.
What's happening: Persistent inflation is quietly forcing people to spend down their cushion just to maintain their lifestyle. Essentials cost more. Discretionary purchases still happen. But the buffer is shrinking.
This matters for consumption trends, credit usage, and how long the consumer can keep propping up growth. When savings dry up, spending either slows or shifts to credit — neither is bullish long-term.
Keep an eye on consumer credit data and retail sales in the coming months.
Personal savings rate dropped to 4.1% in August — lowest since late 2021. That's a 1.6 percentage point decline just since January.
Outside of the 2022 inflation spike, we haven't seen savings this thin since 2008. The 5-year average is now 5.4%, also a 14-year low. Pre-pandemic normal was around 6%.
What's happening: Persistent inflation is quietly forcing people to spend down their cushion just to maintain their lifestyle. Essentials cost more. Discretionary purchases still happen. But the buffer is shrinking.
This matters for consumption trends, credit usage, and how long the consumer can keep propping up growth. When savings dry up, spending either slows or shifts to credit — neither is bullish long-term.
Keep an eye on consumer credit data and retail sales in the coming months.