U.S. consumers have spent all of their pandemic savings

Americans saved up over $2 trillion during the pandemic, but as of March… they’ve spent it all. 

Why it matters: Consumer financial health impacts contractors’ revenues. 

What’s happening: From March 2020 to August 2021, U.S. consumers accumulated $2.1 trillion in excess savings, largely due to stimulus checks and shutdowns that caused them to stop spending.

• Since then, they’ve not only spent, but depleted those savings. In March, according to the San Francisco Fed, that savings pile officially crossed below $0.

What about HVAC? Synchrony in April reported that purchase volume in its home and auto segment, which includes HVAC, dropped by 3% in Q1, partly due to fewer large ticket purchases. 

• Contractors in Florida and Colorado recently noted that the percentage of their customers utilizing financing is at an all-time high.

• Homepros has been told that financing approvals have also taken a hit — at least in certain parts of the South.

• “We are seeing most certainly the consumer step back in certain bigger ticket areas,” said Synchrony CFO Bryan Wenzel.

Yes, but: While there’s uncertainty about the future, there’s reason to believe that consumer spending has been driven by more than just excess savings.

• The job market has been strong, consumers are earning more compared to five years ago, and the average home is worth 51% more than in 2020.

On HVAC, since AC shipments from 15 years ago serve as a good indicator for current year demand, there’s cause for long-term optimism: Starting in 2010, shipments grew 12 years in a row.

Looking ahead: “[T]he depletion of these excess savings is unlikely to result in American households sharply cutting their spending levels as long as they are able to support their consumption habits through continuous employment or wage gains, [and] other forms of wealth,” says the San Francisco Fed.

• 💭 Our thought bubble: Have you noticed more customers holding off on replacements over the past few months? Let us know.