(Natural News) The worsening inflation has forced Americans to dip into their savings to get by, a sign of a bad economy getting worse.
Based on a recent survey, two-thirds of Americans now say they are using their saving for daily expenses. The poll came as prices of goods and services recorded the biggest annual increase since 1981. It also revealed that 67 percent of Americans have been blowing through their savings to deal with the higher prices.
As many as eight percent of Americans surveyed have already drained their savings; 23 percent said they have used up a substantial amount of money that they’d saved; and 36 percent said they spent a small amount from their savings.
Moreover, people of all ages have reported taking money out of their accounts due to inflation, but older respondents are more likely to have their funds intact: 67 percent of individuals aged 77 or older said they haven’t touched their savings – the highest of any group.
While it is unclear why older age groups were less likely to tap into their savings, rising rental costs may be the culprit. Because older households have a high homeownership rate, their housing costs are likely fixed.
Meanwhile, younger Americans are more likely to rent. With the national median monthly rent jumping 15 percent, this cost may be forming a dividing line between the generations.
Another concern is health care. While older Americans typically require more health care, younger households are more likely to accrue medical debt.
Inflation is hurting workers whose wages cannot keep pace with the rising costs. In May, real wages dropped 3.0 percent year-over-year when adjusted for inflation, which further widens the gap between earnings and costs of goods and services. (Related: Why inflation is at a 12-year high.)
Moreover, the rising consumer debt is now at over $266 billion more from just the fourth quarter of 2021 to the first quarter of 2022, which is why the savings are shrinking.
Inflation lowering the value of savings
The U.S. savings rate fell to a 14-year low of only three percent in June. By the end of August, it barely rose at only 3.5 percent.
These numbers are a lot lower than reported previously, and because Americans are not sitting on a pile of savings to help them endure high inflation or another recession, there could be a lot of implications on whether or not the economy can avoid another recession in the next four years.
Just last year, the government reported a savings rate of five percent in July and at the end of 2021, the savings rate stood high at 8.7 percent. However, newly published data put the savings rate much lower at just 3.5 percent in July, down from the revised 7.5 percent in December.
This lower savings rate would not have been a huge deal if it were simply the result of government miscalculations, but this isn’t the case. What’s more worrisome, however, is how quickly it has fallen – with economists saying that high inflation plays a big role in this situation.
Chief economist Gregory Daco of EY Parthenon said: “The hardship caused by inflation means that consumers are dipping into their savings to finance their outlays.”
Even the current savings rate might overstate the ability of Americans to overspend as the bulk of the savings is in the hands of small businesses and upper-income households. The middle-class and lower-income households have fewer savings and therefore have less ability to spend.
Economists were not convinced that Americans have used up the bulk of their savings during the pandemic when the federal government spent trillions of dollars on benefits.
Pantheon Macroeconomics chief economist Ian Shepherdson said Americans have used up around 30 percent of their pandemic savings, but there’s still around $1.4 trillion or more in “excess” savings available. Others believe the stockpile is even bigger. He noted that this is more than enough to stave off recession next year.
Unfortunately, recessions tend to encourage people to save more in case something bad happens, such as losing a job or facing an unexpected medical bill.
PNC Financial Services chief economist Gus Faucher said consumers will face difficult times in 2023 and could pull back on their spending when the labor market softens, which could hurt the overall economy.
Visit Collapse.news for more information about inflation and the economy.
Watch the video below to learn more about how inflation is destroying the savings accounts of Americans.
This video is from the Thrivetime Show channel on Brighteon.com.
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