From savings boom to spending spree?

Consumers globally have racked up $5.4tn in savings on top of what you’d expect if the pandemic had not occurred, estimates Moody’s. The credit rating agency predicts a surge in consumer spending once shops, bars and restaurants reopen thanks to “pent-up demand” and “overflowing excess saving” amounting to 6% of global GDP. Household savings peaked in many advanced economies last year for two main reasons: governments provided high-levels of income support while economic uncertainty and the unavailability of services led consumers to hold on to their cash.

I am not sure personal savings directly equates to consumer demand in comparable magnitude particularly with looming uncertainty given how quickly the world changed a year ago. Add the effect on sentiment of uncertainty related to vaccination, emerging variants etc.

The future is definitely brighter though more complicated.

Global savers’ have stockpiled $5.4tn - offering hope for massive post-Covid spending spree - equivalent to 6% of world GDP - according to Moody's Analytics.

Indeed if consumers spent 2/3rds of their excess savings, they would boost global output by 2% both this year and next.

Maybe Rich people save (out of caution). Poor people spend (out of necessity).

Which is why the huge build-up in savings in many countries during Covid - overwhelmingly concentrated in well-off households - won't necessarily lead to a consumer spending boom.

Or according to Goldman Sachs, "high-income households will hold [rather than spend] the bulk of excess savings."

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