Will pandemic “piggy bank” savings drive global recovery?
Consumers in major world economies collected $2.9 trillion extra in savings while under coronavirus lockdowns. Could the recently piled up cash stashes boost global economies and push their recoveries out of the pandemic recession?
While homebound and out of shops due to Covid-19 restrictions, it is estimated that households in the U.S., Japan and the largest euro-area countries put extra money away. With lockdown restrictions still largely in place and governments still distributing stimulus packages, consumers are highly likely to continue their saving regimen.
$1.5 trillion of the uprising calculated savings were amassed in the U.S. doubling their average annual growth of gross domestic product in the last expansion. In China bank account balances increased by 2.8 trillion yuan more than usual, in Japan by 32.6 trillion yen and by 117 billion pounds in the U.K. The largest euro-area economies’ saving increased by an additional 387 billion euros in total with 142 billion euros accounted for by Germany.
These savings should contribute to a post-pandemic economy rebound after the virus is under control and vaccines successfully rolled out around the globe. Some see consumers engaging in massive shopping splurges with their return to normality and to shops, restaurants, entertainment venues and traveling. They also expect paused big-ticket purchases to accelerate. Others estimate that the extra savings could be used to cover debts or continue accumulating until the end of the health crisis and the revival of the labor market.
In the U.S., the totality of savings in the past year could increase economic growth by as much as 9% while if the savings remain untouched, the economy could grow by 2.2%. Summer 2020 showed how quickly economies can rebound when Covid-19 restrictions are lifted. The same could happen in 2021 and the possibility of large lockdown savings getting poured into the markets make for an optimist view that market demand should bounce back swiftly.
Be on the lookout for spending consumer patterns to track where global economies and their currencies will move to.
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