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The factor that will determine the growth of spending in 2022 will be the behavior of savings, whose rates decreased as the economies reopened. The big question mark is consumer confidence, higher inflation, coronavirus-related restrictions and the rise of the Omicron variant.
Savings behavior is important, because the other consumption drivers for 2022 look unfavorable.
Furthermore, the high savings rates of 2020 and early 2021 mean that households have accumulated a large saving glut, estimated at around US$5 trillion. That could potentially be used to support your spending according to the evolution of the pandemic, your income prospects, your confidence and perception of the future.
The historical evidence on how savings rates behave after a sharp increase, such as the one observed in 2020, does not show a clear pattern. The spikes in savings rates in the early 1990s and early 2000s gave way to lower savings rates than in previous periods.
In some respects, the period after World War II was similar to the current situation. Savings rose sharply during World War II due to restrictions and rationing, then fell sharply after 1945.
In the UK, savings rates were negative and remained very low for several years, while in the US, the decline in the savings rate looks more like a normalization to its pre-war levels.
Another factor supporting the continued decline in savings rates is strong asset prices. Increases in asset prices, especially house prices, have been associated with more dramatic reversals of spikes in savings rates. savings rates.
They increased global stock prices by 30% last year and global house prices by around 8% a year. Even with slower growth this year, high asset price levels may put downward pressure on savings rates, although the picture could change if asset prices correct sharply.
In Canada, last April’s consumer expectations survey suggested that households could spend 18% of their savings next year, and one survey suggested that G7 savers could spend around 20% of their savings. A survey of the German Bundesbank suggested a spending of 25% to 45%.
New York Fed surveys of how households planned to use their stimulus checks found a propensity to spend of 25% to 30%, although stimulus checks are not exactly the same as accumulated savings.
In the United States, about two-thirds of the increase in money holdings has accrued to the richest 10% of households, who generally have a lower marginal propensity to consume than the poorest households. The bottom 50% have accumulated very little, evidence from the UK and from Japan and Canada shows a similar picture.
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