Savings rate shows: normality after the Corona crisis is further away than expected

Gastronomy and retail had to close their doors for a long time.

Gastronomy and retail had to close their doors for a long time.

Christian Charisius / picture alliance via Getty Images

The financial market has already recovered after a rapid crash and is optimistic.

However, the consequences for the economy can still not be predicted precisely.

Saving behavior worldwide shows that the crisis could become worse than many currently think.

The corona crisis has its own dimension. On the one hand, people worry about their own health and that of their relatives. On the other hand, it also affects everyone economically. Either short-time work or even a loss of job, but at least the uncertainty about the future is likely to occupy many people around the world.

In contrast, there is surprisingly strong optimism in the financial market. The stock markets in the USA and also in Germany have fought their way back significantly after their crash in February. It is still the negative headlines that determine the news.

For example, it was announced on Friday that the unemployment rate in the United States rose to 14.7 percent. Before the Corona crisis began in February, the unemployment rate was 3.5 percent, the lowest level in decades. However, more than 33 million people have now applied for unemployment benefits in the United States for the first time since March because of the corona crisis.

Unemployment in the United States and short-time work in Germany are increasing rapidly

The outlook for the future does not bode well either. A leading economic adviser to US President Donald Trump, Kevin Hassett, told CNN that the rate could rise to over 20 percent or even up to 25 percent in May.

In Germany, more than ten million people have already applied for short-time work. These numbers alone are devastating for the economy because unemployed people or people with short-time working do not have the means to consume. But the situation becomes really serious in combination with another key figure, namely the savings rate.

Savings rate at the highest level in decades

The savings rate in the United States increases to almost 14 percent. That is the highest value since the 1980s. For Germany, DZ Bank expects the rate to rise to 12.5 percent in the course of the year – the highest level 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.

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