U.S. consumers are putting away cash at a rate not seen since November 1981, according to a report released Thursday by the government’s Bureau of Economic Analysis (BEA). The report found that the savings rate hit 13.1 percent in March -- up from 8 percent in February.
In March, Americans accrued a total of $2.17 trillion in personal savings. Experts are attributing the surge in savings to the fact that bank savings, money market accounts, and Treasury bonds are yielding meager amounts after the Fed dropped interest rates down to zero last month. The COVID-19 pandemic also prompted the Fed to launch numerous lending programs.
The report said personal income fell 2 percent in March, “in part due to the response to the spread of COVID-19, as governments issued ‘stay-at-home’ orders.” The BEA said this spurred “rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.”
Consumers spent significantly less last month, which could be a key reason they’re saving more. The BEA said Thursday that consumption expenditures fell 7.5 percent last month, likely in large part due to coronavirus-related business closures.
U.S. consumers dropped less money on non-essential medical care, leisure and recreation, and motor vehicles. However, spending increased in the category of food and beverages consumed at home.
The BEA noted in its report that the full impact of the coronavirus pandemic on the economy couldn’t be captured in the initial estimate.
“The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified,” the BEA said.
Robert Frick, corporate economist with Navy Federal Credit Union, said in a tweet that putting money away can only help the nation recover from a recession.
"The savings rate had risen dramatically in the last couple years already," he said. "Speculation is people were bracing for the next recession. I don't look for silver linings, but the more people bank, the better the recovery.”