Here's when the San Francisco Fed expects households to run out of COVID-era extra savings

By Steve Goldstein

Data released this week showed a big rise in retail sales -- but the extra cash that households have on hand to fuel those purchases is running out.

The San Francisco Fed said households held less than $190 billion of aggregate excess savings by June, after having about $500 billion in March. The regional central bank says the excess savings are likely to be depleted in the third quarter of 2023.

The San Franciso Fed acknowledges that estimating excess savings is a difficult task -- one study suggests they already ran out, in the first quarter of 2023, while another says households still hold a considerable amount of excess savings. JPMorgan analysts separately said their estimate of savings adjusted for inflation is now fully exhausted.

"Estimates of aggregate excess savings are filled with uncertainty because they are highly sensitive to the methodology used and the assumptions made about the pre-pandemic trend," the San Francisco Fed said.

The strong 0.7% rise in July retail sales surprised economists, and after the latest industrial production numbers, the Atlanta Fed's GDPNow model estimates a sizzling 5.8% seasonally adjusted annual rate growth in the third quarter.

The yield on the 10-year Treasury BX:TMUBMUSD10Y on Wednesday reached its highest level since 2008.

-Steve Goldstein

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08-17-23 0745ET

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