The savings accumulated during the pandemic have neither had a significant impact on consumption in recent quarters nor will they have one in the coming ones. This is the conclusion of the article published by the Bank of Spain on the impact of the savings pool accumulated during the pandemic on consumption, signed by Carmen Martínez-Carrascal.
It is known that during the most critical phase of the pandemic, Spanish households accumulated a large savings bag, largely due to the logistical impossibility of buying goods and services that were part of their habitual consumption. It is estimated that between January and September 2020, Spanish household savings were almost 4 percentage points of GDP higher than the average observed in the first three quarters of the previous five years.
A very important savings bag that was seen as the great white hope that could relaunch consumption. However, and despite the fact that consumption remains at surprisingly high levels with current inflation, which led to an increase of 1.1% year-on-year in the third quarter of the year; the truth is that this impulse does not come from this pool of accumulated savings.
The article, based on the "Consumer Expectations Survey" (CES) survey that the European Central Bank publishes monthly, indicates that only 15% of households that increased their savings with the outbreak of the health crisis would have "dissaved" later. It does so by counting the households that, after accumulating this savings bank, would have used it between July 2021 and July 2022. In this way, these households were able to maintain a more dynamic consumption path than the rest of the families, but given their number relatively low would not have had a boost in aggregate spending levels.
This refers to the immediate past. Looking ahead, the trend is similar. The excess savings accumulated during the pandemic cannot be expected to provide “a very significant boost to aggregate household consumption in the coming quarters”. From the outset, it must be taken into account that inflation has already reduced the value of these savings in real terms, and furthermore, the CES survey carried out in September shows that households with more savings do not anticipate greater dynamism in consumption in the horizon of one year than households that have not saved.
Other factors are also added, such as the fact that most accumulated savings are concentrated in high-income families, with a lower marginal propensity to consume, and that geopolitical and financial uncertainty increases savings for precautionary reasons in the short term. Another additional factor is that the significant rise in the cost of debt in recent months will foreseeably stimulate accumulated savings to repay loans rather than consumption.
