Inflation Is Eating Up Germans’ Savings

Inflation is eating up Germans’ additional savings. “The extra savings that many households built up during the coronavirus pandemic have now melted away. At the same time, consumer prices will continue to rise sharply. This unfortunately means that private consumption will fail to drive the German economy for the rest of the year,” says Timo Wollmershäuser, Head of Forecasts at ifo. This is the result of a recent analysis of bank balance sheets published in ifo Schnelldienst.

Household deposits at banks in Germany swelled strongly between the second quarter of 2020 and the first quarter of 2021. “If we take as a basis the average propensity to save in the five years before the outbreak of the coronavirus crisis, then a good EUR 70 billion more was parked in bank accounts than usual during this period,” Wollmershäuser adds. But these excess deposits had almost completely been eliminated by the end of the first quarter of 2022. And in the second quarter, this development continued at an almost unchanged pace. “High inflation is likely to have been a key driver of this ‘dissaving’ by households,” Wollmershäuser says.