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23 Aug, 2022 11:48

Inflation ‘eats up’ German savings – study

Funds set aside during the Covid-19 lockdowns have now melted away due to rising prices, IFO researchers say
Inflation ‘eats up’ German savings – study

Inflation has largely depleted the savings Germans managed to accumulate over the past two years, a report from Munich-based IFO Economic Institute published on Tuesday shows.

According to the report, German “private households put aside a lot of money during the two [Covid-19] years,” as disposable incomes were stabilized by extensive government support, while opportunities for consumption were severely restricted. Estimates show the savings rate averaged 15.5% in 2020 and 2021, significantly higher than in the previous five years (10.6%). As a result, so-called surplus savings reached just under €200 billion.

However, these savings have now disappeared.

Inflation eats up surplus savings… The data from the balance sheet statistics of financial institutions shows that these surplus deposits had been almost completely eliminated by the end of the first quarter of 2022,” IFO says in the report. Moreover, it states that in the second quarter of the year, this ‘desaving’ continued, pushing the volume of total bank deposits below the average level for the past five years.

The savings cushions from the coronavirus period have now been used up in many households. At the same time, consumer prices are likely to continue to rise sharply. There is therefore much to suggest that private consumption will no longer be the driving force behind the German economy for the rest of the year,” the IFO researchers conclude.

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