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  • Frank Tian

Recession fear - Money in the Bank

Interesting time. The fear of recession has never been greater, while the consumer loss rate is historically low.

What is the status of U.S. consumers’ money in the bank?

Not too bad!

👉 Moody’s Analytics:

by May, U.S. consumers still had $2.5 trillion in excess savings, though it is gradually dwindling.

👉 JP Morgan:

as of Mar ‘22, even the lowest income group had more cash vs. early 2020.

Note the lowest income group still only have < $1,500. And that is a nominal number. When you consider the inflation, which is much higher than the headline 8.6% for this group, the gain is not as much as it seems.

However, there is good news.

According to Moody’s, the bottom 20% income group currently has wage growth higher than inflation. Thus they are the only group that did not tap into the excess cash in Q1. 🤞

The concern is what will the likely recession do to these financially vulnerable consumers.

For now, there is still some time.

⏲️ Moody’s estimated that the excess cash can support lower-income consumers for another 6 months.

⏲️ In Jun, Jamie Dimon at JP Morgan estimated U.S. consumers still had 6-9 months of spending power in the bank.

Let’s hope that the inflation can be tamed without sacrificing the job market too much, for which we need:

  • The firm yet balanced actions from the central bank (in progress)

  • The coming along expectations from consumers/businesses

  • And some luck, wherever possible from this crazy world.


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