Excess Household Savings Could Lead to Boost in Retail Spending Through 2023

Households amassed significant savings during the pandemic. Significant government fiscal stimulus, federal student loan forbearance and less opportunity to spend on restaurants, leisure travel and other services helped to swell bank accounts for many people. There is some evidence that savings have stabilized, and spending habits are returning, particularly for lower- and middle-income households. Affluent households currently account for the bulk of excess savings, as they tend to consume a lower proportion of their total income. This may explain why retail spending and savings have decoupled in recent quarters.

Regardless, consumer spending is likely to increase this year and next and shift from goods to services, assuming COVID-19 remains under control. This could give a boost to lifestyle retailers in affluent trade areas and popular leisure travel destinations.

FIGURE 1: Household Savings and Neighborhood, Community & Strip Center (NC&S) Retail Sales (2000 - 2023)

Federal Reserve, Bureau of Economic Analysis, U.S. Census Bureau, Oxford Economics, CBRE Econometric Advisors