ECB: Pandemic Savings Have Only Limited Ability to Cushion Energy Price Rises for Consumers

1 August 2022

By David Barwick – FRANKFURT (Econostream) – The nature of savings accumulated during the pandemic is such that this money won’t cushion the impact on consumers of recently more expensive energy, the European Central Bank said on Monday.

In a pre-release from the fifth economic bulletin of 2022, due out Thursday, the ECB noted that households that registered savings during the pandemic represented merely some 20% of the population and devoted a smaller portion of income to energy than the average household.

‘The distribution of savings accumulated during the COVID-19 pandemic may thus limit the extent to which these savings can shield the ongoing recovery of consumption from the adverse impact of the recent surge in energy prices’, the ECB wrote.

According to ECB Consumer Expectations Survey (CES) data, consumers generally envisioned their post-pandemic consumption at a level like that before Covid-19, but the number of those expecting to reduce their consumption exceeded the number of those planning to spend more.

‘Overall, the results from the July 2021 CES did not suggest that widespread pent-up demand would provide an immediate boost to aggregate consumption, especially if household concerns about their finances did not diminish’, the ECB said. ‘As the survey was conducted in mid-2021, this may also have reflected expectations of a further wave of COVID-19, which to a large extent has taken place.’

The study determined that most pandemic savings would probably not be spent until at least the spring of 2022, ‘thus tempering expectations of widespread pent-up demand’, the ECB said.