The meager savings accumulated during the pandemic may prove insufficient to “protect the recovery in consumption”, according to the ECB.
Only a fifth of households in the eurozone saved more during the Covid-19 pandemic, leaving the vast majority without a financial cushion to cushion the current spike in energy prices, the European Central Bank said on Monday. “Most households did not change the amount of their savings during 2020when the pandemic broke out, whileabout 20% increased and about 16% decreased their stock of savingssays an article in the ECB’s monthly bulletin.
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The meager savings accumulated during the pandemic may therefore prove insufficient to “protect the ongoing consumer recovery from the negative impact of the recent spike in energy prices“, underline the authors of the article. Their study is based on monthly surveys of consumers in six eurozone countries (Germany, Belgium, Spain, France, Italy, Netherlands) by the ECB between 2020 and 2021.
Drawing up a picture of the current economic situation in the region, the President of the ECB Christine Lagarde declared again on July 21 that consumption was “supported by the savings that households have built up during the pandemic and by a dynamic labor market.Since the start of the year, European growth has benefited from the lifting of health restrictions and more household spending on leisure, tourism and transport.
But in June, the impact of this spending thaw “begins to fade under the effect of the sudden increase in the cost of living“, recently observed Chris Williamson, chief economist for S&P Global. It remains to be seen what implication this study will have on monetary policy in the euro zone: in July the ECB raised its rates for the first time in 11 years in the face of record inflation and is considering other increases to come depending on economic data from the moment.
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