Since the pandemic started, consumers around the world have saved $ 5.4 trillion – and the British have been some of the biggest hoarders, Moody’s says
- The UK has one of the highest excess savings at over 10%.
- Economic stimulus measures and uncertainties have led to further savings
- Moody’s: Spending $ 1.8 billion in savings could increase global GDP by 2% in 2021
Consumers have saved an additional $ 5.4 trillion since the Covid-19 pandemic began and are more confident about the economic outlook, according to Moody’s.
The rating firm added that if people spent $ 1.8 trillion of that on-hand cash, it could add 2 percent to the global economy in 2021 and 2022.
The UK has also been estimated to have one of the highest excess savings at over 10 percent, second only to the United States, where households put away an additional 12 percent of their cash.
Spare Cash: In the second quarter of 2020, the savings rate in Great Britain rose to an astonishing 29.1 percent. a jump of almost 20 percentage points compared to the previous quarter
There is growing hope among consumers, as well as governments and central banks, that the world economy will see a major boom this year as consumers use some of their built-up money to self-medicate.
Moody’s results come five days after the Conference Board think tank posted the world’s highest consumer confidence ever, a result of a mix of incentive measures, vaccination campaigns and relaxation of travel restrictions.
It also found that consumers “are increasingly excited to return to normal activities at some point this year” and that around three-quarters of the markets surveyed saw confidence gains.
Mark Zandi, chief economist at Moody’s Analytics, said government intervention, economic uncertainty and company closings due to lockdown restrictions helped prop up the high excess savings.
In the second quarter of 2020, the UK savings rate rose to an astonishing 29.1 percent. This corresponds to an increase of almost 20 percentage points from the previous quarter, as the British spent far less of their income on non-essential goods.
Zandi added that these additional savings, along with “unleashing a significant pent-up demand … will spur consumer spending around the world as countries approach and open up to herd immunity”.
A sign that the British were spending much of the excess savings created during the pandemic, bookings for pubs and restaurants more than doubled over the weekend last July
After reopening restaurants and other non-essential stores over the past week, the British have shown strong signs that they are spending some of those excess pounds on getting their hair cut, going to the pub or shopping.
Discount website Vouchers.co.uk estimates the British spent about £ 2.8 billion in stores over the weekend, while separate data from hotel booking website TheFork said bookings for pubs and restaurants were last July have more than doubled.
The Household Responsibility Office has calculated that UK households have saved £ 180 billion and will spend a quarter of that amount over the next five years, particularly on durable goods.
Rich Choice: A Bank of England poll published in November found that 42 percent of the country’s richest households had seen their savings grow in the past 12 months
There is concern, however, that much of excess savings will be hoarded as they are disproportionately concentrated on the richest Britons, who tend to spend a smaller fraction of their income.
A survey by the Bank of England published in November found that 42 percent of the richest households in the country had seen their savings increase in the past 12 months, compared with 23 percent of low-income households.
It’s also more likely that the highest earners have kept their jobs and saved money by not indulging in activities such as going to a restaurant, vacationing abroad, or attending a sporting event in the past year.
In contrast, low paid workers have a strong focus on industries like hospitality, which have seen some of the largest job losses and business declines due to the pandemic.