According to the Ifo Institute, inflation is eating up the additional savings of Germans accumulated during the pandemic. “The savings cushions from the Corona period have now melted away in many households,” said Ifo economic chief Timo Wollmershäuser on the current analysis of the bank balance sheets.
At the same time, consumer prices are likely to continue to rise sharply. “Unfortunately, private consumption as the driving force behind Germany’s economy will therefore fail over the course of the year,” concluded Wollmershäuser.
Household deposits with banks in Germany surged between the second quarter of 2020 and the first quarter of 2021. The reason: Travel, visits to restaurants and other leisure activities were not possible or only possible to a limited extent due to the pandemic. As a result, a lot of money landed on the high edge.
“If you take the average propensity to save in the five years before the outbreak of the corona crisis as a basis, a good 70 billion euros more were parked in bank accounts than usual during this time,” said Wollmershäuser. But these so-called excess deposits were almost completely eliminated by the end of the first quarter of 2022.
And in the spring, this development continued at an almost unchanged pace. “The high inflation is likely to have driven this ‘dissaving’ of households significantly,” said Ifo economic chief Wollmershäuser.
German consumers are currently suffering from the highest inflation in decades because energy became significantly more expensive after the Russian invasion of Ukraine. In July, consumer prices were 7.5 percent higher than a year earlier, after the inflation rate had reached 7.9 percent in May, the highest level since the winter of 1973/1974.
