Elevated saving rates illustrate one of the oddities of the pandemic economy: Despite all the upheavals, as a whole, personal finances have been pretty healthy. Stimulus checks, unemployment benefits, and other government relief have bolstered bank accounts, as have rising wages—a symptom of the high demand for workers. But with those relief programs over, and inflation taking its toll, that could be changing. The decreased saving is a warning sign for household budgets as oil supply disruptions from the war in Ukraine threaten to drive up gas prices and worsen inflation, which is already running at its highest in nearly four decades. “Households have little cushion to fall back on if we see a further spike in gasoline prices linked to Russia’s full-scale invasion of Ukraine,” Paul Ashworth, chief U.S. economist at Capital Economics, said in a commentary. The January saving rate fell as spending increased more than in any month since last March, even after adjusting for the impact of inflation. At the same time, income was virtually flat because rising wages and a Social Security cost-of-living adjustment were canceled out by the end of payments from the child tax credit expansion. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.
