Household saving is defined as the difference between a household’s disposable income (wages, income of the self-employed and net property income) and its consumption (expenditures on goods and services.)

Author: Tiziana Barghini, Valentina Pasquali
Project Coordinator: S.J. Yun

Prior to the financial crisis of 2007-2008, saving rates saw an overall decline, with some countries experiencing a negative saving rate along with increasing household debt. A combination of factors fueled an increase in household borrowing and, concurrently, a decrease in household savings - including low interest rates, lax lending standards, availability of new mortgage products and growth of a global market for securitized loans. In many countries, house prices reached historic levels as new and/or speculative homebuyers used easy credit to purchase properties. In the US, for example, household debt, as measured by the ratio of debt to personal disposable income, was more than 130% by 2007. The US was not alone. Other countries - particularly the United Kingdom, Poland, Hungary and South Korea - also experienced housing bubbles over the same period, along with decreased savings.

Generally, countries with higher disposable incomes, which are often associated to a higher perceived level of certainty over their economic conditions, tend also to have higher savings rates. At the same time, households with higher “perceived wealth” tend to spend more of their disposable income and, therefore, have lower savings rates (a phenomenon known as the “wealth effect”). For example, prior to the financial crisis, households’ “perceived wealth” increased due to inflated real estate values – the inflated values of their homes added to their perception that they were, in fact, wealthy – and the (perceived) need for savings shrank. In the aftermath of the crisis, many countries experienced rising saving rates – in the UK, Canada, the US, Germany, and elsewhere. This is partly due to this “wealth effect.” As the recession hit the value of residential homes and pension funds such as the U.S. 401(k)s – a main source of wealth for many families – households perceived themselves as being less wealthy, which translated into increased savings. Rising unemployment, too, can increase savings as households spend less on discretionary consumer items, as a result of the higher level of uncertainty over their future income.

Economic Outlook No 98 - November 2015

*Values expressed as a percentage

Country
2010
2011
2012
2013
2014
2015
2016
2017
Australia 9.77 11.12 10.47 10.43 9.45 8.91 8.25 7.20
Austria 9.28 7.88 9.22 7.34 7.80 8.68 9.46 9.27
Belgium 8.19 6.59 6.36 4.99 5.10 3.98 3.65 3.58
Canada 4.29 4.42 5.21 5.17 4.02 4.10 3.92 4.22
Czech Republic 7.61 5.90 6.17 5.52 5.71 5.54 5.46 5.46
Denmark 2.13 0.92 -0.05 -0.39 -6.47 -4.06 -3.72 -1.84
Estonia 3.29 4.14 1.44 3.88 3.14 2.93 2.94 2.27
Finland 3.17 1.31 0.71 1.34 -0.25 0.82 1.53 1.45
Germany 9.97 9.56 9.26 9.14 9.52 9.55 9.44 9.07
Hungary 6.77 7.55 5.54 5.44 7.26 9.02 8.10 7.54
Ireland 9.56 7.25 8.47 8.13 6.94 6.86 6.99 7.33
Italy 4.10 3.60 1.85 3.91 3.39 3.80 4.85 6.02
Japan 1.99 2.66 1.23 -0.15 0.85 2.42 1.50 1.75
Korea 4.66 3.86 3.90 5.60 6.97 7.24 7.04 6.84
Luxembourg 13.05 13.57 13.74 16.43 16.76 17.34 17.00 16.98
Netherlands 4.89 5.79 6.82 7.34 8.21 8.53 8.84 9.51
New Zealand 2.74 1.46 2.30 2.15 3.21 3.44 3.21 3.25
Norway 3.95 5.80 7.13 7.59 8.49 8.36 8.28 8.27
Poland 3.02 -0.49 -0.53 0.71 2.14 3.16 3.24 3.33
Slovak Republic 4.66 2.88 1.74 2.91 3.82 3.86 3.87 3.89
Slovenia 6.11 5.54 3.19 5.65 6.49 6.63 6.75 6.10
Spain 3.69 4.65 2.63 4.20 3.88 2.88 2.71 2.66
Sweden 11.02 12.73 15.32 15.07 15.32 15.83 16.46 16.18
Switzerland 17.01 17.84 18.69 19.03 18.28 17.82 17.01 16.79
United States 5.61 6.02 7.63 4.76 4.80 4.87 3.96 3.13
Euro area (15 countries) 7.08 6.82 6.18 6.44 6.48 6.54 6.70 6.76

Comments

No comments yet

Add a Comment

You must be a registered user with Global Finance Magazine to comment.

Forgot Password?