Global savers’ stock of $ 5.4 billion offers hope for post-Covid spending


Consumers around the world have racked up an additional $ 5.4 billion in savings since the onset of the coronavirus pandemic and are increasingly confident about the economic outlook, paving the way for a strong rebound in spending as businesses reopen.

Households around the world have accumulated the surplus – defined as the additional savings compared to the 2019 spending model and equivalent to more than 6% of global gross domestic product – by the end of the first quarter of this year, according to estimates by credit rating agency Moody’s.

And growing global consumer confidence suggests shoppers will be ready to spend again as soon as stores, bars and restaurants reopen when restrictions to control the spread of the virus are relaxed. In the first quarter of this year, the Conference Board’s Global Consumer Confidence Index reached its highest level since the record began in 2005, with significant increases in all regions of the world.

Mark Zandi, Chief Economist at Moody’s Analytics, said: “The combination of a surge in strong pent-up demand and sprawling excess savings will spur consumer spending around the world as countries approach collective immunity and open up. “

Line graph of the Conference Board's Global Consumer Confidence Index showing consumers around the world are feeling optimistic

If consumers spent about a third of their excess savings, they would increase global production by just over 2 percentage points this year and next, Moody’s estimated.

Although the global economy suffered its largest drop in output in modern history last year, household incomes have been largely protected by government stimulus packages unprecedented in most advanced economies. Consumers have also cut spending in the face of high uncertainty about jobs and income, and because many service companies have been closed or restricted.

As a result, in 2020, household savings rates in many advanced economies reached their highest level this century, according to OECD data, and bank deposits grew rapidly in many countries.

Zandi said excess savings were highest in developed economies, particularly in North America and Europe, where lockdowns have been widely implemented and government spending high.

In the United States alone, households have racked up more than $ 2 billion in additional savings, Moody’s estimated. This is before the giant transfers from President Joe Biden’s $ 1.9 billion stimulus package kick in. Together, they are enough to potentially fuel a “prolonged consumer craze,” said Krishna Guha, economist at Evercore ISI, investment banking advisor.

Dot chart showing how households have accumulated an unusual amount of savings over the past year by showing the household net savings rate for various countries

Silvia Ardagna, economist at Barclays, expects “a fairly rapid acceleration in household spending this year” in the United States and “To a lesser extent” in the United Kingdom, but she warned that “a slower rollout of vaccination could mean that any pent-up demand will not be realized in the euro zone” over the next two quarters.

A number of Middle Eastern countries where government support has been generous also have large savings surpluses, while in Asia the accumulated savings surplus was lower than in other regions, as the pandemic was contained and the impact on household behavior was less pronounced.

In South America and Eastern Europe, economies have been weaker due to the hard hit of the pandemic and less government support.

However, the impact of the pandemic has been very uneven and savings have been largely accumulated by the wealthiest households in all regions.

The Morning Consult Consumer Confidence Index showed steady overall improvements between January and April in 15 major economies, but a larger proportion of low-income households said their financial situation had deteriorated compared to a year ago. a year.

More than a third of the richest households in many countries, including China, Australia, Italy, Russia, and the United States, said now is the time to make big purchases, but it’s not was not the case for the poorest households, according to data from Morning Consult. .

Jan Hatzius, an economist at Goldman Sachs, estimated that nearly two-thirds of US excess savings were held by the richest 40% of the population and suggested that this could dampen the scale of the economic recovery because ” high income households [rather than spend] most of the excess savings ”.

Bar graph of% of survey respondents (worldwide) showing consumers save more

Adam Slater, Senior Economist, Oxford Economics, said: “If the excess savings are mainly held by the richer households and these are treated as an increase in wealth rather than an addition of income , we would expect a much lower level of [additional] expenses. “

Nearly three-quarters of UK households who said they increased their savings plan to continue holding them in their bank accounts, according to the Bank of England. Others plan to use their savings to pay off debts, invest or supplement their pensions.

This is in line with Conference Board findings which showed double-digit percentage point increases in the proportion of consumers who increased their savings and equity investments in the first quarter of 2021 compared to the same period last year. .



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