While Americans had built up savings at an unprecedented rate following the pandemic, households are struggling to put money away this year — a trend that has fueled fears among economists of an incoming recession, Newsweek reported. During the COVID-19 health emergency, people's personal savings thrived, with people saving as much as 30 percent of their monthly income and having $2.3 trillion in excess savings between 2020 and 2021, according to the Federal Reserve. Three years later, the rate of savings among American households is rapidly falling. In February, the U.S. personal savings rate was estimated to be around 4.6 percent — much below the decades-long average of about 8.9 percent, according to the Bureau of Economic Analysis. Some economists think that the collapse of household savings could lead to a spending slowdown and trigger a recession. Consumer spending currently represents about 70 percent of the U.S. GDP. Up until now, the recent growth of inflation and the Federal Reserve's attempts to curtail it by raising the bank's key interest rate in 2022 and this year have not curbed household spending by as much as expected. Americans had a lot of savings accumulated during the years of the health emergency they could burn through. Now, these savings are starting to dry up, as inflation remains relatively high at 4.05 percent in May despite having cooled down compared to its peak of 9.1 percent in June last year. On top of that, wages haven't grown much at all in recent years, staying much behind inflation, but it's not only inflation contributing to putting more economic pressure on Americans.
