Our previous analysis suggested that a significant number of households, disproportionately belonging to high income and wealth groups, had saved more than usual due to the pandemic. Results from our latest household survey, conducted with NMG Consulting between 2 and 22 March 2021, show that this trend of large-scale accumulation of savings, particularly by well-off households, has continued this year.
The latest survey also provides evidence on how savings might contribute to the economic recovery. Households’ spending expectations have improved since last year: of those who had saved more than usual because of the pandemic, the proportion intending to spend some of their additional savings rose from 10% last September to 27% this March (Chart A).
Chart A: Around a quarter of households who accumulated additional savings plan to spend some of them
Planned use of funds among households with increased savings
Footnotes
- Sources: 2021 H1 NMG Household Survey and Bank calculations.
Of the 27% who intend to spend some of their savings, only 13% plan to spend more than half of them. Overall, the results imply that around 10% of accumulated savings are expected to be spent over the next three years. This figure appears to be somewhat lower than estimates from two other recent surveys, conducted by Scottish Friendly/CEBR (January 2021) and YouGov (March 2021), which both suggest a figure closer to a quarter. This difference may partly reflect the fact that the NMG survey, unlike other surveys, asks about spending alongside other options, like paying off debts and investing in financial products. Respondents to the NMG survey would therefore have been less likely to include spending on these other uses, which do not directly boost consumption, in their estimates.
Improved spending expectations may largely be driven by the easing of Covid-19 restrictions. Vaccination may also be playing a role at the individual level, increasing confidence to go out and spend. Our latest survey shows that 27% of vaccinated respondents planned to increase their spending in the three months from March 2021, compared with only 20% of non-vaccinated respondents. This pattern held within every age group, suggesting that it is not driven only by age (Chart B).
As well as the impact on individual confidence, vaccines provide protection for the most vulnerable. In doing so, they create economy-wide benefits, improving confidence even for those not yet vaccinated.
Chart B: Vaccinated people are more likely to intend to increase their spending
Proportion of respondents intending to increase spending in the next three months (at March 2021)
Footnotes
- Sources: 2021 H1 NMG Household Survey and Bank calculations.
This post was prepared with the help of Alice Crundwell, Marco Garofalo and Charlie Nourse.
This analysis was presented to the Monetary Policy Committee in May 2021.
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