I've made the case for why I think the US consumer holds up better than anticipated (and certainly better than many other countries). Another factor that will help to keep spending afloat in 2023 is excess savings.
Most low income households have run down any excess savings but the aggregate is still above trend. That will keep spending alive for most of this year and lead to stronger US spending than anticipated.
Quartz today writes about excess savings, noting that they're down from $2.3 trillion in 2021 to $1.2 trillion near the end of 2022. JPMorgan estimates the excess at $0.9 trillion (JPM chart above).
"Deutsche Bank analysts now expect the savings pile to run out by the third quarter 2023, while the slightly more optimistic analysts at JPMorgan Chase see it being exhausted by the end of the year."
The risk in 2023 is that the Fed stays hawkish, or even hikes beyond the 5-5.25% level they've signaled but in late 2023 the excess savings run out just as layoff start. That would lead to a rough outcome in 2024.
