Fitch expects US consumption boost from COVID savings to fade

ISTANBUL

Fitch Ratings said on Thursday that it anticipates the boost in consumer spending in the US, resulting from the accumulated savings during the coronavirus pandemic, is likely to fade.

American consumers currently hold around $900 billion in excess savings, which is equivalent to 5% of consumer spending, the rating agency said in a statement.

If consumers continue to deplete excess savings at the recent average rate of $73 billion per month, the remaining excess savings would be gone by the second quarter of 2024, it added.

"Fitch estimates that the cumulative stock of excess savings has already fallen by 60% from its peak, and a substantial share of the remaining cushion is unlikely to be spent as it accrued to higher income households," Olu Sonola, head of US regional economics, said in the statement.

The agency said two factors may prevent the full depletion of remaining excess savings.

First, some of the excess savings has flowed into equity securities, which are less likely to be converted into spending.

Second, since the majority of excess savings have been used to accumulate liquid bank deposits, much of this has gone into the hands of high-income consumers, who are less likely to reallocate the savings to consumption in the near term.