Do deposit buffers still matter?

Consumer perceptions of their finances have deteriorated, yet deposit levels remain elevated and spending continues. Why?

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David Tinsley

August 2023

Key takeaways

  • Despite continued robust spending growth, U.S. consumers’ perceptions around their finances appear to have deteriorated somewhat over 2022-23. Given households' deposits are still high relative to 2019, why is this?
  • Partly it is timing — while higher than before the pandemic, these deposit buffers have been coming down from their peaks. Households have been living with high inflation and some are experiencing higher borrowing costs.
  • But a longer term view shows deposits are still elevated compared to incomes. And these buffers have helped keep consumer spending relatively high compared to after-tax wages and salaries. Lower- and middle-income consumer spending in particular is likely to continue to gain support from them. But as the boost from these deposit buffers fades, the overall consumer outlook is likely to hinge ever more closely to labor market developments.

Read our full analysis for a more in-depth look at these trends.