With an Extra $5.4 Trillion in Savings, Are Global Consumers Primed for a Massive Spending Boom?
The global economy could get a needed shot in the arm this year if consumers start spending all the money they’ve saved up during the COVID-19 pandemic, according to a new research note from Moody’s Analytics.
The note, issued Monday by Moody’s chief economist Mark Zandi, said consumers worldwide have amassed an extra $5.4 trillion in savings since the pandemic began, which could trigger a massive spending boom this year.
The amount of excess savings stockpiled by households around the world by the end of March is equal to 6% of global gross domestic product, CNN reported. Those savings are in addition to what consumers would have saved had the pandemic never occurred and if saving trends last year had been the same as in 2019, Zandi wrote.
The United States had the largest share of excess savings at about $2.6 trillion, or 12% of the U.S. GDP. The U.K. came in second at 10% of GDP.
Consumers are expected to spend nearly $2 trillion of their surplus cash as many countries roll out vaccines and ease lockdowns and restrictions, and as more governments distribute government stimulus and relief checks.
“The combination of an unleashing of significant pent-up demand and overflowing excess saving will drive a surge in consumer spending across the globe as countries approach herd immunity and open up,” Zandi wrote. “We expect approximately one-third of the global excess saving will be spent this year, adding just over 2 percentage points to global GDP growth.”
The Financial Times noted that a major upswing in consumer confidence also bodes well for the world economy, as shoppers are primed to open their wallets as shops, bars and restaurants return to full strength. During this year’s first quarter, the Conference Board global consumer confidence index reached its highest level since records began in 2005, with all regions of the world seeing an uptick.
Meanwhile, the U.S. Producer Price Index, a measurement of sale prices for goods and services, rose 1% on a seasonally adjusted basis in March, beating the prior month’s performance and topping economist expectations.
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