The post-pandemic party is over and consumers are already starting to feel the effects of a nasty financial hangover that could last well into 2023, according to a published report that analyzed a number of different economic reports.
Consumers and the U.S. economy were buttressed during the pandemic with about $5 trillion, in the form of government stimulus, low interest rates, and emergency lending programs and moratoriums, which kept the country afloat while we fought COVID-19. But now that those programs are over, and we’re seeing rising interest rates, consumers dipping into their savings to cover their bills, and higher prices on just about everything we need to survive.
For example, consumers put away more than $2 trillion in savings during the pandemic, but one-third of that has already been used up, according to the report, citing data from the Bureau of Economic Analysis. The average American is coming home with slightly less in his or her paycheck every week than before the pandemic, which makes it even harder to stay above water. Consumers are saving less and making less, a combination that does not bode well for future stability.
Interest rates on mortgages are at their highest point in nearly two decades and credit card interest rates are up two percentage points in the past six months. That will further strain consumers’ ability to make ends meet and cut down on additional economic activity.
While this all means that more consumers are likely to fall behind on their bills and the number of accounts being placed with collection agencies is likely to start growing after a prolonged slump, consumers are not going to be able to have anything left to cover old debts.