Urban Consumers’ Savings Rose Sharply in 2020
The savings of urbanites in several European countries increased significantly in 2020, the year of the coronavirus. This is a key finding of the first joint study by the ifo Institute and the Technical University of Munich (TU Munich) in cooperation with digital bank N26. The study found that, compared to January 2020, customer deposits in these countries increased by about 20 percentage points in the first lockdown and by another 20 percentage points or so in the second lockdown. This points to a massive backlog of purchasing power in Germany, Austria, Italy, France, and Spain, the study says.
Furthermore, the authors found that after an initial decline, the incomes of urbanites recovered toward the end of 2020; in Germany and Austria, they even exceeded pre-crisis levels. Moreover, high spending on durable, non-essential goods, which tended to fall away significantly in previous crises such as the financial and euro crises, indicates a low level of economic uncertainty among consumers. “Based on our findings, private consumption may well drive a rapid recovery across Europe if spending makes up lost ground,” says Sebastian Wichert, Deputy Director of the ifo Center for Industrial Organization and New Technologies and one of the study’s authors. “This will require effective testing strategies, regional infection management, and an accelerated vaccination campaign; that’s why policies to prop up purchasing power won’t do the trick,” he adds.
Urbanites visibly changed their consumption habits during the pandemic: they withdrew less cash and cut back their spending on services such as restaurant meals and mass transit during the lockdowns. At the same time, they generally spent more money on durable goods, such as electronics and furniture – especially in Germany and Austria, but also in France. In Italy and Spain, meanwhile, purchases of non-essential goods remained mostly below pre-crisis levels during the year of the coronavirus, recovering only toward the end of 2020.
This study marks the starting point of a collaboration between the ifo Institute, TU Munich, and N26. In the future, the ifo-N26-Economic Monitor will use financial data to measure the economic recovery in a timely manner. Key indicators are consumer spending and savings in the largest European economies.
