The high incomes were the only ones who increased their savings and now they are the least affected by the rise in prices
Spain experiment in 2020 and, to a lesser extent, in 2021a savings increase unprecedented, due to restrictions on consumption and the precautionary component in the face of economic uncertainty. However, all that windfall savings was concentrated in only 20% of households, who are the ones who can now use it to weather the inflation.
As has been verified by ECB in his last economic bulletin published this Thursday, “the data reveals that during the coronavirus pandemic most households were not able to increase their savings, kept the amount of savings accumulated over the course of 2020 at the same level, while around 20% increased it and around 16% reduced it“, explains the highest monetary policy body in the Eurozone.
Those who “dissaved” did so because of the unexpected loss of rent they suffered, when they were fired or included in a Temporary Employment Regulation File (ERTE), for example, or because they had meet additional expenses; while those who increased their savings did so due to spending restrictions, fear of contagion and precautionary reasons.
The concentration of pandemic-related savings in specific households now limits the extent to which this saving can cushion the recent rise in prices of energy, points out the ECB, since “households that managed to save during the COVID-19 pandemic only represent around 20% of the population.”
It also happens that these households are less exposed to expenditure items more linked to energy (such as electricity or food) than the average household, since in most cases they have highest rents and energy or food have a lower weight in their consumption basket.
Given that only 1 in 5 households managed to save during the pandemic and these are households with a higher income level, whose consumption is less affected by inflation, the institution that directs Christine Lagarde highlights that this could limit the positive impact of these savings on the recovery of consumptionespecially given the adverse impact of rising prices on spending.
The increase in prices in Spainwhich in July was 10.8% year-on-year and so far this year accumulates a average increase of 8.7%its T impoverishing households and businesses, sinking consumption and limiting economic growth.
As published by the OECD this very Thursday, the real loss of income per capita in the first quarter (January-March, with average inflation in the period of 7.8%) it was in Spain 4.1%, the second highest in Europe behind Austria, where it fell by 5.5%. On average across OECD economies, the drop in income was 1.1%. This real loss of resources has been aggravated in the second quarter, as inflation continued to rise and is now close to 11%.