It’s true that the Catechism says that, but sections 947 and 948 make clear that the phrase is referring to the communion of people for receiving Christ’s sacraments and other gifts. Section 948 further notes that there is a dual meaning which refers in part to people receiving holy “things”.
948 The term “communion of saints” therefore has two closely linked meanings: communion in holy things (sancta)" and "among holy persons (sancti).
"Sancta sancti’s! (“God’s holy gifts for God’s holy people”) is proclaimed by the celebrant in most Eastern liturgies during the elevation of the holy Gifts before the distribution of communion. the faithful (sancta) are fed by Christ’s holy body and blood (sancta) to grow in the communion of the Holy Spirit (koinonia) and to communicate it to the world.
This may be a fine point, but in the context of the term “communion of saints”, the persons are holy people in that they are joined in communion with the Church, whatever their status of personal holiness may or may not be.
The distinction is important for Catholics because of our devotional practice of asking saints in heaven for intercessory prayer. As stated above, we cannot have devotions to people still living on earth. We can ask them to pray for us, or admire their apparent (to us) personal holiness, while recognizing that we do not know all the person’s actions or state of mind as to how personally holy they actually are.
Contrary to your first post, the Church does not follow a practice of always capitalizing the word Saints to refer to those persons in heaven. Sometimes the word is capitalized and sometimes it is not.
I am making kind of a big deal out of this because a lot of non-Catholics read these threads, and we need to be careful about saying “every baptized person is a saint” because that muddies the waters as to what the Church actually teaches about sainthood, especially in view of the fact that many Protestants have used the Bible passages you noted to come up with all sorts of interpretations that differ from the Church teaching.