By Molly Smith
Americans are saving at the lowest rate since 2005, underscoring how inflation and higher borrowing costs are thinning out financial cushions.
The personal savings rate as a share of disposable income dropped to 2.3% in October, according to data from the Commerce Department released Thursday. The report also showed that inflation-adjusted spending remained strong despite elevated, yet moderating price pressures.
Consumers have remained largely resilient amid the double blow of persistent inflation and rising interest rates by the Federal Reserve. Americans are also putting more on their credit cards, illustrated by household debt climbing in the third quarter at the fastest annual pace since 2008.
Read more: US Demand for Credit Cards ‘Robust’ in Face of Surge in Rates
Over the past year, households have been chipping away at record savings accumulated during the height of the Covid-19 crisis, when activity was restricted and millions received relief from the government.
“Households continue to mine a mountain of extra funds piled up during the pandemic,” Sal Guatieri, senior economist at BMO Capital Markets, said in a note. “This extra piggy bank could last another year, also underpinning consumption.”
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