FRANKFURT (Reuters) – Euro zone households could continue to save a large part of their income to replenish wealth lost due to high inflation, the European Central Bank (ECB) said, suggesting that consumption in Berne will continue to weigh on growth in the short term.
The flow of savings feeds an increasingly large stock and removes the prospect of a revival of the economy thanks to consumption.
“The savings rate is expected to remain high in the short term, although slightly below its most recent peak, partly reflecting the moderation of interest rates,” the ECB said in an article in its Economic Bulletin published on Wednesday.
The household savings rate reached 15.7% in the second quarter of 2024, the latest data available, compared to a level of 12% to 13% usually observed before the pandemic.
This situation weighs on consumption and keeps economic activity in negative territory, although the ECB has several times predicted a recovery driven by consumption.
-The main culprit is the inflationary surge of 2021/2022 which has eroded the real wealth of households, according to the ECB, and is encouraging them to rebuild their assets.
The institution, however, continues to believe that household spending will eventually recover: “The probable drop in the savings rate and the continued strong growth in real labor income should favor the dynamics of private consumption.”
(Reporting by Balazs Koranyi; French version by Bertrand De Meyer, edited by Kate Entringer)
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