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The global saver’s $ 5.4 billion stockpile of savers offers hope for post-Covid spending

Consumers around the world have hoarded an additional $ 5.4 billion in savings since the beginning of the coronavirus pandemic and are increasingly confident in the economic outlook, paving the way for a strong rebound in spending. businesses reopened.

Households globally have amassed excess money – by definition additional savings by 2019 spending model and more than 6% of global gross domestic product – by the end of the first quarter of this year, according to credit rating agency Moody’s estimates.

And global consumer confidence is booming that shoppers will be willing to spend again as soon as stores, bars and restaurants reopen when restrictions aim to control the spread of virus is loosened. In the first quarter of this year, the Conference Board’s global consumer confidence index hit its highest level since the record started in 2005, with significant increases in all regions of the world. .

Mark Zandi, chief economist at Moody’s Analytics, said: “The combination of freeing up significantly pent-up demand and excessive saving will drive an increase in consumer spending globally when countries approach herd immunity and more openness. “

According to Moody’s estimates, if consumers spend about a third of their excess savings, they will boost global output by more than 2 percentage points both this year and next year.

The Conference Board's Global Consumer Confidence Line Graph shows Consumers around the world are feeling optimistic.

Despite last year’s global economy experiencing the biggest output drop in modern history, household income was largely protected by unprecedented government stimulus programs in most countries. advanced economy. Consumers also reduce spending in the face of uncertainty about employment and income, and as many service businesses have closed or restricted.

As a result, by 2020, the household savings rate in many advanced economies reaches the highest level in this century, according to OECD data, and bank deposits increase rapidly in many countries.

Zandi says excess savings are highest in developed economies, especially North America and Europe, where close-off is practiced and government spending is high.

The dotted chart shows how households have accumulated an unusual amount of savings over the past year by showing the net savings rates of households in different countries.

In the US alone, households have accumulated more than $ 2 billion in savings, Moody’s estimates. That was before the massive money shifting from President Joe Biden’s $ 1.9 billion stimulus program began. They come together enough to be able to drive a “prolonged consumer boom,” said Krishna Guha, an economist at investment banking advisory Evercore ISI.

Silvia Ardagna, economist at Barclays, expects “household spending to increase quite rapidly this year” in the US “To a lesser extent” in the UK, though she warned that “a slower rollout of immunizations could mean any pent-up demand will not be fulfilled in the euro zone” over the next two quarters.

Some Middle Eastern countries where generous government support also significantly outweighs savings, while in Asia, savings beyond cumulative are lower than in other regions due to pandemic alkalization. mechanisms and effects on household behavior are less pronounced.

In South America and Eastern Europe, savings are lower as a result of the pandemic and less government support.

However, the impact of the pandemic is very unequal and the majority of richer households in all regions have accumulated savings.

The Morning Consult consumer confidence index shows a steady overall improvement from January to April across 15 major economies but a majority of lower income households report their financial conditions. they got worse than they were a year ago.

A bar chart of% of survey respondents (global) shows that Consumers are saving more

More than a third of richer households in many countries, including China, Australia, Italy, Russia and the US, say this is a good time for a big shopping spree, but that is not the case. Poorer families, data from Morning Consult shows.

Jan Hatzius, an economist at Goldman Sachs, estimates that nearly two-thirds of the excess US savings are held by 40% of the richest population and suggests that this could hamper the size of the economic boost. because “high income households will keep [rather than spend] most of the savings are redundant ”.

Adam Slater, lead economist at Oxford Economics, said: “If excess savings are mostly held by wealthy households and they are seen as an increase in wealth rather than as a share of income. We would expect much lower savings [additional] spending. “

According to the Bank of England, nearly three-quarters of households in the UK say increased savings plan to keep them in their bank accounts. Others plan to use their savings to pay off debts, invest or recharge a pension.

This is in line with Conference Board results showing that the proportion of consumers increasing savings and investment in stocks in the first quarter of 2021 increased by double digits compared to the same period last year.



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