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The $ 5.4 million global saver repository offers hope for post-Covid spending

The $ 5.4 million global saver repository offers hope for post-Covid spending

Consumers around the world have saved $ 5.4 million in savings since the coronavirus pandemic began and are increasingly confident in their economic outlook, paving the way for a rebound in spending as businesses reopen.

Homes around the world accumulated excessive overcrowding, which is as defined additional savings Compared to the 2019 spending model and compared to more than 6% of global gross domestic product – at the end of the first quarter of this year, according to estimates by the credit rating agency Moody’s.

And high consumer confidence around the world suggests that shoppers will be willing to re-spend as soon as stores, bars and restaurants reopen when restrictions to control the spread of the virus are eased. In the first quarter of this year, the Global Consumer Confidence Index of the Conference Board reached its highest level since records began in 2005, with significant increases in all regions of the world.

Mark Zandi, chief economist at Moody’s Analytics, said: “Releasing significant projected demand and overflowing with excessive savings will lead to an increase in consumer spending around the world as countries approach and open up herd immunity.”

The Conference Board shows a line chart of the consumer confidence index around the world.  Consumers around the world are happy

Moody’s estimates that if consumers spent a third of their excess savings, world production would increase by just over 2 percentage points this year and next.

Although last year’s global economy suffered the biggest drop in production in last year’s history, domestic incomes have been largely protected by unprecedented government stimulus schemes in the most advanced economies. Consumers also reduced spending in the face of high uncertainty about jobs and income, and many service businesses were closed or limited.

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

Zandik said there has been excessive savings in developed economies, especially in North America and Europe, where many blockades have been imposed and government spending has been high.

In the U.S. alone, homes have accumulated more than $ 2 million in additional savings, Moody’s estimates. That huge transfers from President Joe Biden’s $ 1.9 million stimulus program are underway. Together they are enough to waste “extended consumption,” said Krishna Guha, an economist advising evercore ISI investment banks.

The plot plot graph shows how households have accumulated an unusual amount of savings in recent years showing a net household savings ratio in several countries

Silvia Ardagna, an economist at Barclays, expects “a relatively rapid acceleration in household spending this year” in the US and “To a lesser extent” in the UKHowever, he warned that in the next two quarters he could say that “slowing down vaccination will not make it possible to implement the euro-denominated demand”.

Many Middle Eastern countries, which have had abundant government support, also have huge over-savings; In Asia, on the other hand, the accumulated excess savings were lower than in other regions, as the pandemic has been maintained and the impact on household behavior has been less.

Savings in South America and Eastern Europe were lower due to the great success of the pandemic and government support.

However, the impact of the pandemic has been very different and savings have largely accumulated in richer homes in all regions.

The Morning Consult consumer confidence index showed steady improvement from January to April in the 15 major economies, but a higher share of lower-income families reported a worsening financial situation a year ago.

More than a third of the wealthiest households in many countries, including China, Australia, Italy, Russia and the US, said it was the right time to make big purchases, but that was not the poorest house, data from Morning Consult showed.

Jan Hatzius, an economist at Goldman Sachs, estimates that nearly two-thirds of the U.S.’s excess savings are made by the richest 40 percent of the population, suggesting that this could delay the scale of the economic boom as “high-income homes will hold up.” [rather than spend] most of the excess savings ”.

% Of respondents survey global bar chart (global) Showing more savings for consumers

Adam Slater, chief economist at Oxford Economics, said: “If excess savings are mainly taken by the wealthiest households and these are seen as wealth growth rather than an increase in wealth, we expect a much lower level. [additional] expenditure “.

According to the Bank of England, they have reportedly increased their savings plan to keep almost three-quarters of UK households in bank accounts. Others plan to use the savings to settle debts, invest, or supplement pensions.

This is in line with the findings of the Conference Board, which showed a two per cent increase in the proportion of consumers who increased their savings and investment in shares in the first quarter of 2021 compared to the same period last year.

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