Is There a Penny Shortage? Explaining the Circulation Issue

The public has often wondered about a “penny shortage” or broader coin scarcity, especially in recent years. While it might seem like coins have disappeared, the situation is more nuanced than a simple lack of pennies. It is more accurately described as a disruption in coin circulation.

Understanding Coin Scarcity

The U.S. Mint has continued to produce billions of coins, including pennies, at its facilities, increasing production to an average of 1.65 billion coins per month in 2020 from 1 billion per month in 2019. Despite this consistent output, the normal flow of coins through the economy was interrupted, making them less accessible for everyday transactions. This issue became particularly prominent during the summer of 2020, as the COVID-19 pandemic altered economic behaviors. Coins, instead of moving from businesses to banks and back into circulation, began to accumulate in people’s homes or within closed businesses.

Reasons Behind the Situation

Several contributing factors led to this disruption in coin circulation. Widespread business closures and stay-at-home orders significantly reduced economic activity, meaning fewer transactions occurred where coins would typically be exchanged, and many coins remained dormant in household coin jars and piggy banks, rather than being spent or deposited. Concurrently, there was an accelerated shift towards digital payment methods, such as credit cards, debit cards, and mobile payments. This change in consumer behavior reduced the overall reliance on physical currency for purchases, further slowing the return of coins to banks and businesses. Additionally, some bank branches adjusted their operations, including reduced hours or services, which affected the public’s ability to easily deposit or exchange coins. These combined factors created a bottleneck in the coin supply chain, preventing available coins from circulating freely.

Effects on Commerce

The disruption in coin circulation created practical difficulties for businesses and consumers alike. Many retailers found themselves struggling to provide exact change, leading to increased requests for customers to pay with cashless methods or provide the precise amount. This created inconvenience for shoppers, particularly for those who rely on cash for daily transactions, including lower-income households or individuals without bank accounts.

Small businesses, especially those heavily reliant on cash transactions, faced particular challenges. Without enough coins to make change, some were forced to turn away cash-paying customers, potentially leading to lost revenue. Accepting card payments exclusively also meant incurring processing fees, which could reduce already thin profit margins for these establishments. The overall impact highlighted the continued importance of physical currency for a segment of the population and for certain business models.

Responses to the Shortage

Authorities and various sectors of the economy implemented actions to address the coin circulation problem. The Federal Reserve, recognizing the issue, collaborated with the U.S. Mint and financial institutions to improve coin distribution. In July 2020, the Federal Reserve convened the U.S. Coin Task Force, comprising representatives from across the coin supply chain, to identify solutions and promote better circulation. As part of these efforts, the U.S. Mint significantly increased its coin production to help meet demand, producing 25% more coins in 2020 and 2021 compared to prior years.

Financial institutions and retailers encouraged the movement of coins. This included banks offering incentives for coin deposits and retailers providing incentives for customers exchanging rolls of change. Public participation was actively encouraged through awareness campaigns, such as the “#GetCoinMoving” initiative. This campaign urged the public to return spare coins to circulation by spending them, depositing them at financial institutions, or redeeming them at coin-counting kiosks.