Americans have spent their savings. Economists worry about what comes next

Analysis by Nicole Goodkind, CNN

Published 7:32 AM EDT, Tue May 7, 2024

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New YorkCNN —

Americans saved quite a bit of money during the pandemic: $2.1 trillion worth, to be exact.

That extra cushion meant that consumers kept spending in the years that followed and the economy remained robust despite rising interest rates and persistent, though gradually decreasing, inflation.

What’s happening: The most recent estimates of excess pandemic savings in the US economy have turned negative, according to Hamza Abdelrahman and Luiz Edgard Oliveira, economists at the San Francisco Federal Reserve.

That means many Americans have more debt than savings and suggests “that American households fully spent their pandemic-era savings as of March 2024,” they wrote in a recent report.

Consumer spending plays a crucial role in driving economic growth in the United States, and it has shown remarkable strength over the past two years. But now that excess savings have now dwindled to nothing, that could hurt spending and spell trouble for the American economy.

Consumers aren’t shopping like they used to and a slew of retailers in recent weeks have announced price cuts as they strive to pull people into stores and entice them to spend money on things like new clothes, decorative items for the home and arts and crafts or hobby kits.

Shoppers have pulled back for a year now as costs have risen higher than they were three years ago and as incomes failed to keep up, said Sarah Wyeth, managing director, retail and consumer with S&P Global Ratings.