Pandemic’s deposits feed consumption
The Hellenic Statistical Authority (ELSTAT) data on the volume of retail sales in the first eight months of the year confirm what many of us have observed in our daily lives: that despite inflation, prohibitive electricity bills and rising interest rates, to a large extent people are still traveling, going to tavernas, shopping, driving their cars – in short, they appear to be consuming more and more.
According to ELSTAT, the retail trade volume index increased by 4.3% in August compared to the same month of the previous year and by 4.6% in the January-August period. As Eurobank points out in its “7 Days Economy” bulletin, released Thursday, this means that “household consumption expenditure, at least until August 2022, has shown resilience to inflationary pressures and increasing uncertainty.”
But how do Greeks manage to maintain this consumption, while inflation dissipates real incomes? The economists’ answer is that consumption was fueled “by savings.” As the Eurobank bulletin points out, “the accumulated savings of the pandemic contributed to the resilience of household consumption expenditure, in addition to the government’s support measures against the energy crisis.”
In fact, the ratio of savings per disposable income has now dropped into negative territory. Based on ELSTAT’s latest data on the “quarterly non-financial accounts of institutional sectors,” in the second quarter of 2022, households’ gross disposable income increased by only 1.7% compared to the corresponding quarter of the previous year (from 32.45 billion euros to €32.98 billion), while final consumer spending increased by 20.1% (from €31.4 billion to €37.7 billion). That is, while income increased by just €0.5 billion, consumption increased by €6.3 billion. Therefore, the household savings rate in terms of gross disposable income fell into negative territory, at -14.2% in Q2, or -€4.7 billion, compared to 3.4% or €1.1 billion in Q2 of 2021.
However, while savings as a percentage of disposable income have fallen, bank data show that deposits continue to grow. According to the latest Bank of Greece data, an additional €8 billion entered banks this year and while the increase comes largely from businesses that almost doubled their deposits, households also increased them by 21%.
