Higher-income earners, meanwhile, have been building up savings, with two-thirds of total savings held by the highest quintile of earners. As I discuss in this note, the result is a historically high level of excess savings, which I expect will fuel a multiyear increase in services spending, benefiting industries such as healthcare, travel, and recreation.
A Closer Look at the Spending and Savings Patterns
In thinking about the spending/saving intentions of US households, there are valuable insights in the New York Federal Reserve Bank’s Survey of Consumer Expectations (FIGURE 1). March survey readings suggested that consumers broadly expected to spend a quarter of their government payments, save 42%, and use the remaining third or so to pay down debt. This was similar to intentions shared in January, after the second round of checks. Unsurprisingly, spending plans were at their highest after the first round of checks, when the greatest proportion of the population was unemployed.