Households saving bigger share of their incomes
Households continue to save an increasing share of their incomes, new figures show. In the third quarter of last year Irish households saved 16 per cent of total disposable income, according to Central Statistics Office data published yesterday.
The new figures, which have been adjusted for seasonal factors by statisticians for the first time, show that the savings rate in the third quarter was the second highest since figures were first compiled in 2002.
High savings rates are a feature of economies which have suffered collapsed property prices. In post-crash periods households, in an effort to pay down debt and strengthen their balance sheets, spend less on consumption over extended periods. This is among the most important reasons why recessions which take place after property crashes last longer than other types of recessions.
More positively, the total disposable income accruing to Irish households continued its solid recovery up to the third quarter of last year.
Following a sharp decline from end-2008 to the beginning of 2011, the trend has been solidly positive, with growth of more than 7 per cent between the third quarter of last year and the low point at the beginning of 2011. However, all the additional disposable income accruing to households is being saved. The amount households are spending has stagnated since the worst of the recession ended in late 2009.
The upward trend in the savings rate will come as a disappointment to the Government. Ministers and officials have repeatedly stressed the potential for more rapid recovery if households saved less and spent more of their incomes.