U.S. households have stashed away more cash than previously estimated, with some economists suggesting there might be an extra $1.2 trillion in savings compared to pre-pandemic levels.

The revelation came from unexpected revisions by the Bureau of Economic Analysis (BEA).

By recalculating the household savings rate, lowering the pre-pandemic savings rate from 7.9% to 6.5%, and factoring in a higher current savings rate, the total amount of excess savings has rocketed from prior estimates of $400 billion to an astounding $1.2 trillion, according to JPMorgan.

“These figures now imply households' excess savings may not be exhausted until sometime next year,” wrote JPMorgan economists Michael Hanson and Murat Tasci in a recent note.

A bigger cushion

Before the revisions, the Fed predicted that households would run out of excess pandemic savings by the third quarter of 2023.

The revised data has extended the runway, potentially delaying the economic downturn that some experts had anticipated would begin before 2024.

“It definitely raises the prospects of a soft landing pretty significantly,” Robert Sockin, a senior global economist at Citigroup, told Bloomberg.

These findings are particularly encouraging for an economy that is wrestling with elevated borrowing costs and inflation still exceeding the Fed’s 2% target.

The Labor Department's consumer price index (CPI) indicates that, compared to the same time last year, consumer prices increased by 3.7% in September, a figure consistent with the rise seen in August.

The YOLO economy

Perhaps the best evidence that Americans haven’t run out of excess savings is how much they’re currently spending on leisure and recreation.

According to the Department of Commerce, household spending in August was 5.8% higher than a year ago when the economy was supposedly in a better position.

A huge chunk of that spending was devoted to experiences and “recreational services.”

Even though Americans haven't faced stay-at-home orders for quite some time, there remains a prevailing sentiment that they are making up for lost time, or that the uncertainty of tomorrow encourages us to spend today.

This perspective is shared by Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

“We’re in a YOLO economy,” said Samana, referring to the acronym for “you only live once.” “We should be in an intermittent fasting economy to save up for the recession.”

The YOLO economy is also evident in credit card debt, which has surged past the $1 trillion mark for the first time.

Before the pandemic, credit card purchases were predominantly discretionary, according to industry research. But times may have changed.