Moody’s: Savings of people grew $5.4 trillion globally during pandemic

Consumers around the world have stockpiled an extra $5.4 trillion of savings since the coronavirus pandemic began and are becoming increasingly confident about the economic outlook, paving the way for a strong rebound in spending as businesses reopen, according to the credit rating agency Moody’s, Report informs referring to Financial Times.

Households around the globe accumulated the excess - defined as the additional savings compared with the 2019 spending pattern and equating to more than 6 per cent of global gross domestic product - by the end of the first quarter of this year.

Booming global consumer confidence suggests shoppers will be willing to spend again as soon as shops, bars and restaurants reopen when restrictions to control the spread of the virus are eased. In the first quarter of this year the Conference Board global consumer confidence index hit its highest level since records began in 2005, with significant uplifts in all regions of the world.

Mark Zandi, chief economist at Moody’s Analytics, said: “The combination of an unleashing of significant pent-up demand and overflowing excess saving will drive a surge in consumer spending across the globe as countries approach herd immunity and open up.”

If consumers spend about a third of their excess savings, they would boost global output by just over 2 percentage points both this year and next, Moody’s estimated.

Despite the global economy last year suffering its largest fall in output in modern history, household incomes have largely been protected by unprecedented government stimulus schemes in most advanced economies. Consumers also reduced spending in the face of high uncertainty about jobs and incomes, and because many service businesses were shut or restricted.

As a result, in 2020 household saving rates in many advanced economies reached their highest levels this century, according to OECD data, and bank deposits increased rapidly in many countries.