Gone are the years of the pandemic, when household savings skyrocketed to close to 18% of their disposable income. After last year's strong correction, this 2023 CaixaBank Research expects it to continue to fall and stand somewhat above 6% (7.2% the previous year). It will be a lower level than the average for the 2015-2019 period, when it stood at 6.7%. In a report, the research service details that the rate will fall mainly due to inflation and the economic slowdown, which will cause consumption to grow more than income.
"Employment, which is the main determinant of private consumption, is doing well, but inflation eats up purchasing power," reflects Joan Ramon Rovira, director of the research service of the Barcelona Chamber of Commerce. “If employment grows, people tend to consume at a rate equal to or greater than their disposable income, reducing savings if necessary to offset the bite of inflation,” he adds.
CaixaBank details that gross disposable income will grow somewhat more than in 2022, but below the increase in consumption. Therefore, you will save less.
With the reduction in savings, the rate will be at the levels of 2018. Last year "the savings rate fell to levels very similar to the pre-pandemic, after two years at levels much higher than normal due to pandemic restrictions." 7.2% of 2022 is equivalent to around 58,500 million euros of savings.
Javier García-Arenas, an economist at CaixaBank Research and co-author of the study, recalls that during the pandemic the savings rate grew a lot because the restrictions limited consumption. UAB professor Josep Oliver adds that there was also a “precautionary effect”. It occurs when consumers withhold consumption due to fear of what the financial situation of families will be in the future. “The works of the European Central Bank (ECB) detail that the precaution when consuming was more severe in the covid than the one that occurred during the 2008 financial crisis because it was not known how the pandemic would evolve.”
García-Arenas insists that "during the pandemic there were protectionist economic mechanisms and policies and, for this reason, the drop in disposable income was so small." In addition, Oliver remembers that when talking about household disposable income, it is about the aggregate number of its members. Therefore, “although income growth is less than inflation individually, as more people enter the job market, household income grows,” he adds.
And where do households place that accumulated savings? CaixaBank Research details that equity holdings and investment funds dominate the ranking, whose weight stabilized at 44.7% of the total last year. Behind are bank deposits, which are gaining prominence and increasing their weight to 37.4%, two points more than the previous year and the highest percentage since 2013. Although little, some entities began last year to remunerate liabilities. On the contrary, insurance and pension funds reduced their weight to the lowest since 1998 (12.2% of the total, two points less than in 2021).
Another way of analyzing savings is to check the evolution of the financial wealth of families. The CaixaBank Research report finds that it has increased by 281.3 billion compared to 2019, largely driven once again by "the high savings accumulated by families during" the covid. The report qualifies that although "it seems like a high figure, it must be taken into account that we are in an inflationary context in which the increase in prices has eroded the value of assets in real terms." Inflation between the end of 2019 and 2022 has been 12.0%, while the revaluation of financial assets is lower, 11.5%.
On the other hand, the CaixaBank research service notes that "families continued to deleverage in 2022. At the end of the year, household debt stood at 53.0% of GDP compared to 58.4% previously." The reduction is mainly due to "a denominator effect", since the GDP grew spectacularly in 2022. In the whole of last year, families contracted bank loans for an amount of 2,822 million, a flow much lower than that of 2021 ( 6,807 million).
