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Press Release

Cleveland Fed: Consumers still have sizable excess savings and may keep spending it – for now

Consumers still have a sizable stock of excess savings, accumulated during the pandemic, and they may keep spending it to make up for what they seem to believe to be a temporary decline in real disposable income, according to a new report from the Federal Reserve Bank of Cleveland.

In “Excess Savings and Consumer Behavior: Excess Compared to What?,” Martin DeLuca and Roberto Pinheiro note that researchers have used different definitions of “excess savings,” leading to strikingly different results.

The Cleveland Fed researchers use a definition that incorporates the concept of “consumption smoothing” – the idea that consumers typically maintain their spending habits when their real disposable income temporarily moves up or down.

For instance, households largely returned to the prepandemic spending trend once lockdowns lifted and the pandemic eased, despite increases in disposable income driven by stimulus programs and decreases driven by inflation.

The model used by DeLuca and Pinheiro suggests that excess savings exceed $600 billion, which could contribute to inflationary pressure if consumer spending persists. But if consumers begin to believe that their disposable incomes have fallen and won’t rebound, they may hold on to more of their savings, which would ease inflationary pressures.

“It is important that the income shock is perceived by households to be temporary in this calculation as otherwise households would deviate from their prepandemic consumption trend,” DeLuca and Pinheiro write.

Read the Economic Commentary: Excess Savings and Consumer Behavior: Excess Compared to What?

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Chuck Soder,, 216.672.2798