Excess savings compared to consumption in Europe and the US are still substantial, with the highest levels in the UK and Spain at 20-25%. In the US and Germany, however, they are below 8%. The US’s excess savings have been rapidly declining due to reopening and inflation, and they may be exhausted by summer. Europe’s excess savings have not been utilized as much as in the US, primarily due to unequal distribution where the bottom 40% of households have no excess savings while the top 20% have additional savings ranging from EUR14,000 in Germany to EUR33,000 in Spain, and also because they are primarily invested in illiquid assets such as real estate. Fears of recession, persistent high prices, rising interest rates, and social protection reforms have resulted in elevated savings intentions in Europe, and even an increase in Germany. Consumer spending is expected to be the weakest link in 2023.
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