Savings rate still declining - forces GDP back to old trend line

Personal savings have fallen below the post Great Financial Crisis average and is currently at 4.4%. The Pandemic and fiscal stimulus kept and put a lot of money in pockets. The pandemic stopped spending and fiscal policy added to household budgets. The first savings spike was the pandemic shock, and the second spike was the fiscal policy shock. The spending downtrend has been reversed and balance sheets have been improved. Revolving consumer credit declined and is only now reaching 2020 levels.

This is not like 2005-2008 when there was a combination of low savings and poor balance sheets, yet a savings decline means there is less funds available for discretionary spending. The equity market decline cuts into household wealth. Together these two effects will translate into a consumer spending slowdown. Even if this is does not lead to a recession, GDP will fall to the old pre-pandemic trend line.