"FOR THE past year the success of America’s economy has rested on three pillars: a healthy labour market, falling inflation and robust spending fuelled by savings accumulated during the pandemic. This last pillar may be starting to give way. Research by Hamza Abdelrahman and Luiz Oliveira of the Federal Reserve Bank of San Francisco suggests that Americans have burned through more than 90% of the “excess savings” they amassed in 2020 and 2021. What little remains, the economists estimate, is likely to be gone by the end of September.

During the pandemic stimulus cheques and other government support boosted personal incomes by more than $1trn, while lockdown restrictions reduced Americans’ spending by another $1trn. As a result, monthly personal savings swelled from around 9% of income in 2019 to more than 30% in the spring of 2020, and 20% during the Alpha and Delta waves of the pandemic the next year. All told, Americans accumulated excess savings—the amount above what would be expected from pre-pandemic trends—of around $2.1trn.

But data from the Bureau of Economic Analysis, a government agency, show that by June 2022 America’s personal-savings rate had plummeted to just 2.7%. Although the rate has ticked up slightly since then—in June households squirrelled away 4.3% of their incomes—it remains well below pre-pandemic levels. There are signs that a growing number of households are financially stretched. "

https://www.economist.com/graphic-detail/2023/08/21/americas-pandemic-savings-are-running-out

In comparison to consumer sentiment, household saving is a lot more fundamental. Regardless of sentiment, depleted saving will limit future spending to income without borrowing. In contrast, low consumer sentiment would limit people to spend on luxurious but otherwise not needed items. They would also seek out low cost needed items. But it does not necessarily limit consumers' total spending if their saving is still substantial.

On Sunday, August 27, 2023 at 11:48:51 AM UTC-4, ltlee1 wrote:
> "FOR THE past year the success of America’s economy has rested on three pillars: a healthy labour market, falling inflation and robust spending fuelled by savings accumulated during the pandemic. This last pillar may be starting to give way. Research by Hamza Abdelrahman and Luiz Oliveira of the Federal Reserve Bank of San Francisco suggests that Americans have burned through more than 90% of the “excess savings” they amassed in 2020 and 2021. What little remains, the economists estimate, is likely to be gone by the end of September.
>
> During the pandemic stimulus cheques and other government support boosted personal incomes by more than $1trn, while lockdown restrictions reduced Americans’ spending by another $1trn. As a result, monthly personal savings swelled from around 9% of income in 2019 to more than 30% in the spring of 2020, and 20% during the Alpha and Delta waves of the pandemic the next year. All told, Americans accumulated excess savings—the amount above what would be expected from pre-pandemic trends—of around $2.1trn.
>
> But data from the Bureau of Economic Analysis, a government agency, show that by June 2022 America’s personal-savings rate had plummeted to just 2.7%. Although the rate has ticked up slightly since then—in June households squirrelled away 4.3% of their incomes—it remains well below pre-pandemic levels. There are signs that a growing number of households are financially stretched. "
>
> https://www.economist.com/graphic-detail/2023/08/21/americas-pandemic-savings-are-running-out
>
> In comparison to consumer sentiment, household saving is a lot more fundamental. Regardless of sentiment, depleted saving will limit future spending to income without borrowing. In contrast, low consumer sentiment would limit people to spend on luxurious but otherwise not needed items. They would also seek out low cost needed items. But it does not necessarily limit consumers' total spending if their saving is still substantial.

"America's pandemic savings are running out" and "US consumer bust shrinks world trade" are
the two headlines from The Economists and Asiatimes separated by days. Are the events linked?

https://asiatimes.com/2023/08/us-consumer-bust-shrinks-world-trade/

"US imports of consumer goods dropped by a record 17% in the second quarter of 2023, as the Covid
boom in work-from-home electronics faded. All the major exporters of electronics, including Taiwan,
South Korea and China, showed corresponding declines in exports.
US manufacturing has also slowed. In an August 23 note, Standard and Poors reported ...

The freefall in US imports was concentrated in home electronics, which saw a surge in demand during
the Covid pandemic and a subsequent decline. US auto imports meanwhile rose during the second
quarter to $105.8 billion from $102.5 billion in the first quarter.

The decline in China’s second-quarter exports had nothing to do with re-shoring, contrary to the claims
of some economic commentators...

In an April 2023 study, Asia Times showed that China’s exports of intermediate goods to “friend-shoring”
venues like Mexico, Vietnam and India rose in lockstep with American “friend-shoring” imports.

A new study presented to the Kansas City Federal Reserve’s annual conference at Jackson Hole August
26 came to the same conclusion as the Asia Times study. Professors Laura Alfaro of Harvard Business
School and Davin Chor of Dartmouth “documented a decrease in the share of US imports from China and
a corresponding increase in the share of US imports from Vietnam and Mexico between 2017 and 2022,”
according to Bloomberg News.

Alfaro and Chor concluded that US “indirect supply-chain links to China remain intact; along some
dimensions — through China’s economic ties with Vietnam and Mexico — these indirect links have even been
intensifying. Even though the US may be reallocating its sourcing and imports toward Vietnam and Mexico,
it may de facto remain connected with and dependent on China through third-countries, including through
Vietnam and Mexico.”"