The corona crisis is increasingly affecting the real economy. While more than 40 million people are unemployed in the United States, more than ten million people in Germany have applied for short-time work. These numbers are devastating for the economy because unemployed people or people with short-time working do not have the means to consume. Especially when unemployment also reaches the management level or in general employees with high incomes, expensive purchases are postponed or completely dispensed with.
This trend can already be recognized by another key figure, namely the savings rate. In the United States, it jumped to 33 percent in April – by far the highest value ever recorded since the recording started in the 1960s. The previous record saving rate was 17.3 percent in May 1975. In March 2020, the rate was just under 13 percent.
Savings rate at the highest level in decades
Analysts explain the importance of this key figure to the US financial broadcaster CNBC. Accordingly, US consumers make up more than two thirds of the US economy. The speed and robustness of the economic recovery thus depend on whether the stronger saving behavior is only a temporary or long-lasting phenomenon.
A portfolio manager explains to the broadcaster the spiral that triggered a high savings rate in times of crisis. “The more people save, the less they spend. The less they spend, the worse the recession will be. And the worse the recession gets, the more they save, ”says the analyst.
Not only in the USA: Consumers worldwide save more than usual
Not only in the USA, people in Germany are also saving more and more. DZ Bank expects the rate to rise to 12.5 percent in the course of the year – the highest since 1992. For China, too, experts assume that consumers will hold back on consumption and would rather save money.
This means: Those who are unemployed or have less money available due to short-time work do not want to consume. Those who keep their jobs prefer to save. This combination does not bode well for consumption and therefore for the economy. The normality of the economy seems more distant than optimism in the financial markets suggests.
Consumption, Brexit, trade dispute: Smoldering dangers in the background
In addition to the dangers of consumption, there are other trouble spots in the background that can no longer be ignored. So there is still no solution to Brexit and the trade conflict between the United States and China is escalating again.
The looming recession could be even more violent than previously expected due to the strong cut in consumption and the smoldering geopolitical risks.