But the cushion is starting to shrink: After peaking at $2.5 trillion in mid-2021, US saving fell back to $1.7 a year later, according to Moody’s.
And consumers with an annual income of less than $35,000 are the first to be affected, with a 39% drop in their savings during the first six months of the year. As a result, consumer credit is on the rise, according to data from the Federal Reserve (Fed).
“We see continued pressure,” said Michael Witynski, general manager of the low-cost chain Dollar Tree, who sees a “shift” in consumers “who are much more focused on their needs and trying to make sure they have enough money to finish the month”.
Retailer earnings reports in recent days have given a mixed picture of consumer health.
The Target supermarket chain was hit, facing a sharp drop in its October sales, which could herald a weak holiday season.
“We’ve had consumers dealing with very stubborn inflation quarter after quarter,” Chief Executive Officer Brian Cornell said on a conference call with analysts. “They’re very cautious, they’re very vigilant, and they’re like, ‘Well, if I have to buy, I want it to be a good deal.'”
But competitor Lowe’s, which specializes in décor, is optimistic, pointing to a “solid” third quarter with no signs of weakening. “We’re not seeing anything like a drop in purchases,” CEO Marvin Ellison said.
Consumers like Charmaine Taylor, who checks airline websites frequently, are keeping an eye out. Until now, Taylor has seen her travel aspirations frustrated by the exorbitant prices of plane tickets. The woman, who works in childcare, isn’t sure how much money she will be able to spend on gifts for her family this year.
“I’m trying to buy some gifts,” Taylor said at a park in Harlem earlier this week. “I don’t know if I’ll be able to do it. Inflation is hitting pretty hard.”