Expert insight

Consumer spending could push Fed higher

April 03, 2023

Box-plot chart shows four scenarios for the level of excess savings for year-end 2023 and 2024, using bottom-up and top-down approaches to calculate it. The median of those two approaches is shown as well.  For year-end 2023, all four scenarios—upside, baseline, downside, and extended downside—show consumers holding excess savings. The median baseline forecast is for close to $700 billion in excess savings.  For year-end 2024, three scenarios—baseline, downside, and extended downside—show consumers holding less savings than they had pre-pandemic. The median baseline forecast shows savings down roughly $400 billion from pre-pandemic levels. In the upside scenario, the top-down forecast is also in negative territory, but the median and bottom-up forecasts are in positive territory.
Quarterly growth in consumption from the fourth quarter of 2021 through the first quarter of 2023 varied but came close to the historical trend average. Vanguard’s baseline forecast for quarterly growth in consumption shows that it decelerated from Q1 2023 to Q4 2023 but accelerated thereafter and would nearly reach the historical trend average by Q4 2024, the end of the forecast period.


Bob Behal
Vanguard Information and Insights

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