Store and restaurant closures have prompted consumers nationwide to stay home, spend less, and save more. Dwindling consumer confidence along with uncertainty surrounding the job market, has shifted many from a spending mode to a saving mode. The average savings rate for the past 60 years since 1959, has been 8.9%. The savings rate jumped from 8.4% in February this year to 32.2% in April as the pandemic took hold of the U.S. economy. The most recent release by the BEA shows the savings rate at 25.7% for the quarter ending June, nearly triple of the 60-year average.
Economists view the heightened level of savings as restrictive to a sustained economic expansion. Since nearly 70% of GDP is represented by consumer expenditures, higher savings tend to take away from spending throughout the economy. Consumer confidence is also a factor as a lack of confidence tends to increase savings while minimizing spending.
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