Savings Rates: Too High For Its Own Good?

Savings Rates: Too High For Its Own Good?

Savings Rates: Too High For Its Own Good?

Here is a complicated issue.  Are consumers and businesses saving too much cash? I’d say you can never squirrel too much money away, but it looks like that might be an issue for deposit accepting institutions.

Today’s WSJ covers the shift in savings by businesses following COVID. 

The WSJ provides a chart on Total Deposits in U.S. commercial banks; it illustrates the cash movement into deposits. For example, on March 4, 2020, U.S. savings deposits at commercial banks grew to $13.48 trillion.  On May 19, 2021, the metric rose nearly 50% to $17.10.

The WSJ does not present consumer savings rates, but the Fed tracks the number here.  In March 2020, the U.S. consumer savings rate grew to 12.9% from COVID-worried consumers.  Two months prior, in January 2020, the savings rate was  7.6%, on par with the prior year.  In the latest reported numbers, reported for April 2021, the consumer savings metric rose to 14.9%

Three takeaways here.

The short story: Savings levels are up for consumers and businesses.  It might be bad news for some banks, but it sure feels good to have money in the bank.

Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

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