New research by investment bank Morgan Stanley found that US consumers have been saving more money than ever, having stockpiled a record $12.5 trillion in savings from April through July.
This stockpiling comes amid likely economic uncertainties later this year, in light of a probable new wave of Covid-19 and the aftermath of November’s presidential election. According to the bank’s managing director and chief US economist, Ellen Zentner, the sum equates to 13.5 months of the $600 a week supplemental unemployment insurance benefit that lapsed on July 31.
Savings have been built up across the income spectrum, said Zentner, as cited by Yahoo Finance. That runs counter to the more usual scenario of money being accumulated by wealthier households during tough economic times while lower income households are forced to spend more aggressively due to job losses.
According to the Commerce Department, August retail sales rose by 0.6 percent, slightly missing forecasts for 0.7 percent growth. At 0.6 percent, the growth rate in retail sales last month cooled from a downwardly revised pace of 0.9 percent in July – a 1.2 percent increase for July had previously been reported.
Several major US retailers have warned of sales slowdowns this month, with experts raising the alarm over when those households with savings will actually start to spend that money.
“We have a couple of land mines in the economy, such as the loss of the $600 unemployment insurance supplement, and the lack of aid to state and local governments,” warned Deloitte Insights’ senior economic forecaster, Dr. Daniel Bachman. “So, we do have a negative fourth quarter for GDP. The worst-case scenario is that hits, along with no [Covid-19] vaccine, and consumer spending just really starts to decline as people begin to be concerned about the longer term.”
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