U.S. Consumers Saved $1.5 Trillion During Pandemic, Economy Modestly Expanded at Start of 2021

Households in the U.S. have saved $1.5 trillion throughout the COVID-19 pandemic, according to Bloomberg’s aggerated national central banks and statistical agencies data.

The staggering number is greater than the average annual growth in the gross domestic product (GDP) equivalent to South Korea’s output. Bloomberg Economics data indicated that all the money saved in the past year would propel economic growth to as much as 9% rather than the 4.6% currently projected for 2021 GDP.

The news comes the same day as the Federal Reserve’s second Beige Book survey on current economic conditions was published, which indicated that the U.S. economy saw only modest expansion over the six weeks between January and mid-February.

Overall, most businesses are optimistic about recovery, the report said. The $1.5 trillion in household savings may boost business activity further.

The Fed said the economy expanded in eight of the Fed’s 12 regions, where Federal Reserve banks are placed to monitor major financial activity. The New York area economy declined modestly, and the Boston area saw mixed results, the report said.

In Southern regions, expansion was slight to moderate. In Atlanta, labor market conditions improved, and wage pressure was subdued. Retail spending had no change.

Low-skill occupations are suffering the most, according to the report.

“Constraints on labor supply included those related to COVID-19, childcare, and unemployment benefits,” it said.

Some individual economic indicators have shown a steady uptick throughout 2021. Home sales saw an increase in January, while retail sales surged with the aid of last year’s stimulus checks. Still, other indicators, such as consumer sentiment, have declined.

“The economy is a long way from our employment and inflation goals,” Federal Reserve Chairman Jerome Powell said in testimony to the Senate Banking Committee on Feb. 23.

As more economic data awaits and vaccine rollout continues, The Federal Open Market Committee (FOMC) said in January it would continue to increase its holdings of U.S. Treasury securities by at least $80 billion and mortgage-backed securities by at least $40 billion. The Fed’s quantitative easing efforts have been in full throttle since last March. With interest rates near zero, there is little room left to cut them further for increased economic stimulus.