MADISON, Wis.–After years of discussion around “excessive savings” held by the average consumer, that talk is now finished, according to TruStage’s chief economist, who is predicting a decline in member savings in 2024.
Writing in the company’s new Trends Report, which is based on credit union performance data through September, Rick noted that excess savings had been defined as the additional savings balances accumulated during the COVID-19 pandemic due to three COVID-19 stimulus checks and a reduction in spending on services.
“This was the biggest increase in savings per member in credit union history,” he said. “But these excessive savings have been eliminated due to member deposit withdrawals and higher inflation.”
The new Trends Report shows the average credit union member currently holds $13,471 in total savings deposits at their credit union, down $662 from the record $14,133 in April 2022.
Ongoing Declines
Rick noted that when adjusted for inflation, real savings per member has been declining since April 2021, when it reached a record high of $15,700.
“Since then, prices have risen a total of 15.4%, reducing the purchasing power of members’ savings deposits,” Rick stated. “Today real savings per member ($13,471) is at a level it would have been without the COVID-19 pandemic given its
normal annual growth of 0.8%. Over the last year, this drawdown of excess savings has kept consumer spending strong, economic growth above its long run 2% trend and the economy out of a recession.”
As an example, Rick pointed to data around third
quarter consumer spending, which increased at a “very robust” 3.6% annual rate, while the overall economy grew a “remarkable 5.2%.”
Looking Ahead
“Going forward into 2024, consumers will be reluctant to reduce further their dollar amount of savings because continued deposit withdrawals would reduce their real savings balances below the level consumers would feel comfortable,” Rick forecast. “Therefore, expect 2023 to be the weakest year for deposit growth, and 2024 to see 3% deposit growth.”
CUToday.info has full coverage of the latest Trends Report here.
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