\u201cPeople are going to happily spend but they\u2019re not going to completely let loose,\u201d said Mark Zandi, chief economist of Moody\u2019s Analytics. \u201cIt\u2019s just going to take time to shake the lifestyles they\u2019ve had for the past year.\u201d<\/p>\n
But Ethan Harris, head of global economic research for Bank of America Merrill Lynch, thinks the spending binge could be massive.<\/p>\n
\u201cThere\u2019s lots of deferred spending that could come into the economy very fast,\u201d Harris said. <\/p>\n
From stimulus checks to Tax Day 2021: <\/strong>Answers to your questions about IRS changes, COVID relief and more<\/span><\/p>\n Stimulus check guide: <\/strong>Where’s my stimulus check? Can I still qualify? Answers to your questions on COVID relief, IRS tax refunds and more<\/span><\/p>\n Americans are flush with about $2 trillion in bolstered savings as a result of the federal payments and their constrained lifestyles, including about $850 billion in stimulus checks, according to Zandi and Harris. That includes rounds of $1,200 and $600 payments last spring and in January, and the current $1,400 checks.<\/p>\n A Federal Reserve survey in October found that 29% of Americans’<\/strong> initial stimulus payments was spent, 36% was saved and 35% was used to pay down debt.<\/p>\n Zandi believes that pattern will largely be repeated this year, with Americans on average spending about a third of their $1,400 checks in addition to 20% of their total COVID-related savings. While low- and middle-income households will spend all or most of the reserves, high-income people will likely only spend about 4% and save the rest because they view the windfall as wealth, he says.<\/p>\n That\u2019s significant because Zandi estimates the top fifth of income earners own 75% of the excess savings. Goldman Sachs reckons that group has about 40% \u2013 still a disproportionately large share.<\/p>\n (Photo: Getty Images)<\/span><\/p>\n Dwight Safer, 50, of Colchester, Vermont, invested all of the stimulus money he received last year in stocks and plans to do the same this year.<\/p>\n \u201cI didn\u2019t need it,\u201d said Safer, a semiconductor industry engineer who recently received a large bonus. \u201cIt\u2019s nice to get it but I wish it would go someplace else of better use.\u201d<\/p>\n Zandi believes consumer spending will grow 6.4% this year and the splurge from COVID-related savings will add 2 percentage points to economic growth, which he estimates will total 6%. He doesn\u2019t foresee a run-up in inflation that prompts the Fed to raise interest rates in the foreseeable future.<\/p>\n Harris, however, is more bullish. He says a relatively modest portion of the initial stimulus checks was spent a year ago because people were nervous about the early recovery. Now, the economy is in better shape \u2013 vaccinations are growing rapidly and many more spending outlets will soon be open.<\/p>\n Harris also believes high-paid workers will view much of their stimulus payments and excess savings as income rather than wealth that\u2019s typically amassed over a long period. If that\u2019s the case, they could spend about 30% of it as they release pent-up demand, he says, while lower-income households spend most of their cache.<\/p>\n Chips and cars: <\/strong>Why could you soon pay more for a used car? Computer chip shortages.<\/span><\/p>\n All told, Harris expects consumer spending to grow 8.4% this year while the economy grows 7%, paving the way for a possible surge in inflation by 2023.<\/p>\n Ted Adams, 77, of Wayzata, Minnesota, saved previous stimulus checks but he partly used the latest $2,800 payment for him and his wife to buy two new iPhone 12 costing $1,600. The stimulus check prompted them to move up the purchases, which they were planning to make next year.<\/p>\n \u201cIt\u2019s like found money,\u201d said Adams, a retired serial entrepreneur.<\/p>\n Mary von Tobel, 66, of O\u2019Fallon, Illinois, saved part of the stimulus money but used some of it to increase her donations to food banks and will also likely use some to defray tax and insurance payments due next month. The payments could also help fund trips she and her husband plan to take locally and to Japan later this year. Although they would have taken the vacations anyway, the money may prompt them to spend somewhat more lavishly, she said.<\/p>\n \u201cI look at it more as wealth,\u201d said von Tobel, a retired technical writer. \u201cWe didn\u2019t earn it.\u201d<\/p>\n![](\"https:\/\/www.gannett-cdn.com\/-mm-\/5c8bf163d61d56de560dacb3f845b9116f1adc6e\/c=118-0-2003-1414\/local\/-\/media\/2021\/03\/22\/USATODAY\/usatsports\/economic-stimulus-check.jpg?width=540&height=405&fit=crop\")
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