Gone are the years of the pandemic, when household savings soared to nearly 18% of their disposable income. After last year’s strong correction, in 2023 CaixaBank Research expects it to continue falling and to be slightly above 6% (7.2% the previous year). It will be a lower level than the average for the 2015-2019 period, when it stood at 6.7%. In a report, the research service details that the rate will drop mainly due to inflation and the economic slowdown, which will cause consumption to grow more than income.
“Employment, which is the main determinant of private consumption, is doing well, but inflation eats away at purchasing power”, reflects Joan Ramon Rovira, director of the studies service of the Barcelona Chamber of Commerce. “If employment grows, people tend to consume in proportion equal to or greater than their disposable income, and reduce savings if necessary to compensate for the bite of inflation,” he adds.
CaixaBank details that gross disposable income will grow slightly more than in 2022, but below the increase in consumption. Therefore, less will be saved.
With the reduction in savings, the rate will be at levels of 2018. Last year “the savings rate fell to levels very similar to those of the pre-pandemic, after two years at levels well above normal due to pandemic restrictionsâ€. 7.2% of 2022 is equivalent to around 58,500 million euros in savings.
Javier GarcÃa-Arenas, economist at CaixaBank Research and co-author of the study, recalls that during the pandemic the savings rate grew a lot because the restrictions limited consumption. UAB professor Josep Oliver adds that there was also the “precautionary effect”. It appears when consumers reduce consumption due to fear of what will be the financial situation of families in the future. “The work of the European Central Bank (ECB) details that the caution when consuming was more serious during the covid than that which occurred during the financial crisis of 2008 because it was not known how the pandemic would evolve”.
GarcÃa-Arenas insists that “during the pandemic there were protectionist economic mechanisms and policies and, for this reason, the drop in disposable income was so small”. In addition, Oliver remembers that when we talk about the disposable income of households it is about the aggregate amount of its members. Therefore, “even if individual income growth is lower than inflation, as more people join the labor market, household income increases”, he adds.
And where do households put this accumulated savings? CaixaBank Research details that the ranking is dominated by participations in capital and investment funds, whose weight stabilized at 44.7% of the total last year. Behind are bank deposits, which gain prominence and increase their weight to 37.4%, two points more than the previous year and the largest percentage since 2013. Although not much, some entities started last year to remunerate the liability. On the contrary, insurance and pension funds reduced their weight to the lowest since 1998 (12.2% of the total, two points less than in 2021).
The CaixaBank Research report states that it has increased by 281,300 million in relation to 2019, largely driven once again by “the high savings accumulated by families during the covid”. The report clarifies that although “it seems like a high figure, it must be taken into account that we are in an inflationary context in which the increase in prices has eroded the value of assets in real terms”. Inflation between the end of 2019 and 2022 has been 12%, while the revaluation of financial assets is lower, at 11.5%.
On the other hand, CaixaBank’s research service states that “families continued to deleverage in 2022. At the end of the year, household debt stood at 53% of GDP in contrast to a 58.4% previousâ€. The downgrade is mainly due to “a denominator effectâ€, as GDP grew dramatically in 2022. Last year as a whole, families took out bank loans amounting to 2,822 million, a flow well below of the year 2021 (6,807 million).
