Worcester Business Journal

wbjournal.com | February 22, 2021 | Worcester Business Journal 15 didn't expect their finances to return to normal until the latter half of 2021 or even 2022, according to a December report by the global consulting firm McKinsey & Co. Another 40% said they are more mindful of how they spend their money compared to before the pandemic, with only 6% indicating they were paying less attention to such spending. Nearly half, or 46%, said they were unsure in the country's economic recovery from the pandemic – an even slightly worse rate than the 43% who gave that sentiment last March when the pandemic first began causing major behavioral shis across the country. A similar poll conducted each month by the University of Michigan found consumer confidence lower in December than it was in April. Confidence was worst among the lowest-income households. Post-pandemic educated guesses Already, bankers are asking each other what savings and spending trends will look like as soon as this summer, when enough people are vaccinated and virus case numbers could be low enough for some semblance of normalcy. No one knows the answer. Some consumers are worried about a double-dip recession. Others are itching to find something to spend on, McEvoy said. "You're always going to have that across your customer base, a spectrum from risk tolerance to conservatism," he said. e U.S. Federal Reserve forecast in December a 4.2% jump in gross domestic product, up from 4.0% when it made its previous prediction last September, and the American Bankers Association is predicting 4%. e Conference Board, a New York consortium of dozens of mostly current and former major-corporation CEOs, gave itself a wide range: anywhere from 0.8% growth to 6.4%, depending on how effectively the pandemic is brought under control. Michelle Meyer, a managing director and head of U.S. economics for Bank of America Global Research, said in a Worcester Business Journal economic forecast event Feb. 11 so much money is being saved – $1.6 trillion above pre- pandemic levels nationally – a post- pandemic spending spree is likely. "It's remarkable how much cash is More income Note: Spending is seasonally adjusted Source: Federal Reserve Bank of St. Louis B A N K I N G & F I N A N C E F O C U S The national personal savings rate, typically between 6% and 8%, soared during the coronavirus pandemic. More savings 0 5% 10% 15% 20% 25% 30% 35% 2016 2019 M J J A S O N D J F M A 2020 M J J A S O N D J F M A M J J A S O N D J F M A 2018 2017 M J J A S O N D J F M A M J J A S O N D J F M A Personal savings rate 33.7% 13.7% National consumption was on a steady climb over the past five years before the coronavirus pandemic hit. Consumption has rebounded from last spring but remains below pre-pandemic levels. Less spending 2016 2019 M J J A S O N D J F M A 2020 M J J A S O N D J F M A M J J A S O N D J F M A 2018 2017 M J J A S O N D J F M A M J J A S O N D J F M A Personal consumption $14.8B $10B $11B $12B $13B $14B $15B $12.1B $14.5B Source: Federal Reserve Bank of St. Louis out there," Meyer said. Brian Stewart, the CFO of Middlesex Savings Bank, is less confident. Deposits at the Natick-based bank have risen at the sharpest rate he's seen in his 25 years there, he said, and people are likely to hold onto the savings they've built up may not be likely to evaporate once the pandemic does. "at becomes the big question," Stewart said. "Is this a temporary thing, and it's all going to go flying out the door? I'm not sure it is." Despite that uncertainty, there's already some consideration given to whether the pandemic recession will lead to longer-term changes in consumer habits, such as higher savings rates, or even people looking to seize the day and spend more lavishly. "It could certainly go either way," Murphy said. Brian McEvoy, senior retail banking officer at Webster Five $15B $20B Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec Personal income (billions) $20.2B $18.9B $19.6B Personal income for Americans ended 2020 higher than it began despite the coronavirus pandemic. Note: Some months are prelimary and some may have since been revised Source: U.S. Bureau of Economic Analysis W

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