Rising spending pushes household savings ratio on disposable income down to 5.7%
The rise in prices over the past year has forced many households to adjust their budgets to cope with the current inflationary environment. However, efforts to salvage the situation have not stopped households from already spending much more than they save. Specifically, the savings ratio fell to 5.7% of disposable income in the third quarter, from 8.4% in the previous quarter. It is also the lowest figure since 2018, according to the National Institute of Statistics (INE).
On the one hand, the data has a positive side, as it would indicate that Spaniards are firmly spending the money saved during the pandemic on consumption, one of the engines of the country’s economic growth, in a period that also coincides with the summer Holidays. However, it is clear that many families are forced to use their savings to cover expenses that until recently were part of the normal budget.
Rampant inflation – still standing at 8.9% at the end of the third quarter under review – has already begun to reflect the increase in the price of the shopping basket, which has been added to other higher expenses such as electricity bills or gas. And families have been left with no choice but to spend more, often even more than they earn.
In fact, the INE data shows how in the third quarter households’ disposable income increased by 1.6% to EUR 186,600 million, while their final consumption expenditure totaled EUR 192,034 million, 12% more. Investments also showed a negative trend, falling 2.9% to EUR 12,901 million, while savings fell by EUR 5,986 million.
The decline in the savings rate is more pronounced compared to the year-on-year basis. At the end of 2021, it was 12.3% of disposable income. The maximum was reached in the second quarter of 2020, in complete lockdown due to the pandemic, when the rate exceeded 25%.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
