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Personal Savings Rate, Cash Assets, and Revolving Credit

| January 24, 2023

The recent breakdown in the U.S. personal savings rate to near record lows has fueled the narrative that consumers are in dire need of cash heading into 2023. This is troublesome because consumer spending accounts for approximately two thirds of gross domestic product. Yet fixating on the savings rate alone is misleading given that households continue to maintain significant cash buffers built up during the pandemic. In fact, personal savings deposits and money market assets have only slightly declined from their post-pandemic peaks while checkable deposits continue to grow.

Just as the decline in the personal savings rate is helping to sustain consumer spending despite inflation, so too is the increase in revolving consumer credit. Yet while revolving consumer credit outstanding has risen since the 2020 lows, it has yet to break out of its pre-pandemic trend. Likewise, delinquency rates (while increasing) remain well below the pre-pandemic ten-year average.

It is our view that a continuing strong consumer base, as evidenced by elevated cash balances and strong consumer credit, has the propensity to sustain consumer spending and support asset prices in 2023. While the personal savings rate, revolving consumer credit, and delinquency rates warrant monitoring, none are yet flashing concern.

Figure 1: Cash and Debt Overview - U.S. Consumers



Chart Content: U.S. personal savings as a percentage of disposable personal income.

Chart Significance: The personal savings rate peaked at over 33% during the depths of the COVID-19 pandemic, allowing households to build significant cash buffers. It has since declined to 2.4%, well below the 10-year pre-pandemic average of 7.3%, as households continue to consume despite decades-high inflation.


Chart Content: Personal sector checkable deposits and currency, total time and savings deposits, and money market mutual fund assets.

Chart Significance: Personal savings deposits and money market mutual fund assets have only slightly declined from their post-pandemic peaks while checkable deposits continue to grow. This supports the notion of sustained consumer spending into 2023.


Chart Content: Revolving consumer credit outstanding, which includes credit card lending, auto loans, and lines of credit but excludes mortgage loans.

Chart Significance: To finance the purchases of goods and services during this inflationary cycle, consumers have increased their usage of consumer credit since the pandemic lows reached in January 2021. While the increase is worrisome if left unchecked, so far revolving consumer credit outstanding has merely returned to its pre-pandemic trend.


Chart Content: U.S. delinquency rates for credit cards and all consumer loans.

Chart Significance: Delinquency rates are on an uptrend since hitting recent lows in September 2021 yet remain well below the pre-pandemic 10-year average of 2.7%. This further supports the notion that increasing revolving consumer credit outstanding remains manageable and should continue to support consumer spending in 2023.


Investment advice offered through CX Institutional, a registered investment advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in the presentation may not develop as predicted.

All data is sourced from Bloomberg, through the release of monthly figures from the U.S. Bureau of Labor Statistics or from the Federal Reserve and any of its affiliated regional location.