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U.S. Economics: Macro Commentary & Insight

As Consumer Confidence Weakens, Activity Remains Resilient.

December 2, 2022

  • Will Christmas spending drain savings to the point of no return?
  • Monthly personal savings rate drops to second-lowest on record.
  • YoY credit card balances post the largest gain in 20 years.
  • Estimates are that the average consumer will burn through excess savings in eight months.
  • Strong Nonfarm Payrolls print hits market just ahead of Fed blackout period.

Berkadia’s analysis desk made good on their promise to contribute to boosting consumer spending this holiday shopping season, and we hope you did the same. These weeks are typically the busiest and most dollar-generating periods of the holiday season. While consumer confidence is weakening, consumer activity has remained resilient, and the combination of a better-than-expected, revised 2.9% Q3 GDP and a strong Nonfarm Payrolls print today of 263K jobs show this economy is still chugging. Consumer spending has been unwavering, as real PCE increased 0.5% in October, boosted by goods consumption, as consumers allocated a larger portion of their pocketbook towards new vehicles.

To keep up with inflation, consumers have been reliant upon their household balance sheets and elevated wages as a courtesy of a strong but ebbing labor market. JOLTS job openings declined significantly in October, showing a lightening in the availability of new positions. Offsetting this was the strong Nonfarm Payrolls number and strong gains in hourly earnings (5.1% YoY and 0.6% MoM respectively), giving credence to the “higher for longer” narrative Chair Powell has been spinning. As the Fed continues to utilize its tools to combat elevated inflation, both wages and employment will come under pressure, contributing to the weakening of household balance sheets.

Prior to the pandemic, consumers saved at a 7.7% rate, based on a two-year average, and 7.4% rate, going back to 1978. While the savings rate naturally skyrocketed in the pandemic, the surge in reopening spending has caused the index to plummet to 3.3%, with two months of data still to be released. On a monthly basis, the personal savings rate further declined to 2.3% in October, the lowest of the year and second-lowest ever recorded. The savings rate has been trending downward as consumers have been more willing to perform a “savings dip” to finance purchases. It makes sense consumers need to dip into savings, as in inflation-adjusted dollars, the average personal disposable income is less now than it was a decade ago in 2012.

Personal Savings Rate Levels Show Pressure on Consumers

Source: U.S. Bureau of Economic Analysis, Berkadia

October’s personal income and spending report also indicates a much quicker drawdown of the so-called “excess” in household savings. Excess savings, the cumulative funds individuals and households acquired in excess of what they would have saved given no pandemic, are what have been keeping consumers afloat. But not for much longer. The below chart illustrates the razor-thin line consumers have before living beyond their means. By our estimates, consumers have less than a year, about eight months, before the depletion of excess savings on which consumers are sitting is depleted and the average consumer moves into deficit spending.

According to the Household Debt and Credit quarterly report released by the Federal Reserve Bank of New York, household debt balances increased by $351 billion in Q3 2022 to $16.51 trillion, an increase of 2.2% over Q2 2022. This implies that debt balances have risen by $2.4 trillion by the close of 2019. YoY credit card balances were up 15%, the largest increase in more than two decades, en route to a $38 billion increase since Q2 2022. While the increase in credit card debt may not pose a problem at this moment given consumer savings and the current state of the U.S. labor market, the $38 billion balance will wear on household balance sheets, especially should there be upside-surprises in inflation or significant loosening in the labor market.

U.S. Excess Savings

Source: U.S. Bureau of Economic Analysis, Berkadia

Consumers have been increasingly utilizing either excess savings or credit card debt to support their spending habits while confronting persistent and elevated inflation. While both strategies can keep households afloat in a tight labor market with strong wage growth, eventually the music will stop (Please, stop the Pentatonix Christmas Album!) and all households may not find a chair. While the music speakers still likely have a full charge, in the short term we have the Fed blackout period starting tomorrow, so look for any messaging on changes in Fed policy to be leaked through the media ahead of the December 13/14 meeting.


  1. U.S. Census Bureau
  2. U.S. Bureau of Labor Statistics
  3. U.S. Bureau of Economic Analysis
  4. Federal Reserve of New York:

This commentary and any statements, information, data and content contained therein, and any materials, information, images, links, sounds, graphics or video provided in conjunction with this document (collectively “Materials”) has been prepared for informational purposes or general guidance on matters of interest only, and does not constitute professional advice, advertising or a solicitation. The Materials are of a general nature and not intended to address the circumstances of any particular individual or entity. You should not act upon the information contained in the Materials without obtaining specific professional advice. As such, nothing herein constitutes legal, financial, business, investment or tax advice and you should consult your own legal, financial, tax, investment or other professional advisor(s) before engaging in any activity in connection herewith. The information in the Materials is not a substitute for a thorough due diligence investigation. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in the Materials, and, to the extent permitted by law, Berkadia Commercial Mortgage LLC ( together with its affiliates, the “Company”) neither accept nor assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the Materials or for any decision based on them. No part of the Materials is to be copied, reproduced, distributed or disseminated in any way without the prior written consent of the Company.

Questions? Contact us.

Brandon Hardin

Josh Bodin
SVP – Securities

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