Europeans Unwillingly Hoarded Cash During Lockdowns, ECB Says

(Bloomberg) -- Europeans struggled to spend their money in the midst of the coronavirus pandemic, sparking a surge in savings, according to the European Central Bank.

With economies in lockdown and millions of consumers forced to stay at home, people in the euro area were unable -- rather than unwilling -- to consume as normal in the first half of the year, the ECB said in its economic bulletin published Tuesday.

While consumers hoarded more cash over concerns about job losses, “forced savings seem to be the main driver of the recent spike in household savings,” the researchers said, citing first-quarter data and indications for the second quarter.

The findings are important because economists across the globe are trying to gauge whether the crisis will lead to a prolonged period of weak demand. While the figures suggest that people weren’t necessarily holding on to cash for precautionary reasons, the ECB warned that could change.

Recent surveys indicate that consumers plan to spend less on big-ticket items over the next 12 months than at the beginning of the year, despite having saved more than usual, the ECB said in its report.

Such a spending pattern could keep savings rates higher than pre-Covid levels, but with the balance shifting toward precautionary motives, according to the central bank.

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