European Households Achieve Highest Saving Rates in Years Amid Economic Uncertainty

European Households Achieve Highest Saving Rates in Years Amid Economic Uncertainty

European households are saving at their highest rates in years, with new data revealing that saving rates in the eurozone have surpassed pre-pandemic levels. According to Eurostat, the statistical office of the European Union, the saving rate in Europe reached 15.7% in the second quarter of 2024, up from 15.2% in the previous quarter. This marks a significant increase from the approximately 12% saving rate seen in the years leading up to the COVID-19 pandemic.

A high saving rate often reflects economic anxiety, as low consumer confidence drives households to save rather than spend or invest. During the pandemic, for instance, Europe experienced a dramatic rise in saving rates, peaking at 25.3%. In the wake of the pandemic, Europe has struggled to maintain robust economic growth compared to other global regions.

The World Economic Forum’s latest Chief Economists Outlook highlights several factors contributing to the region’s sluggish economic performance, noting that political uncertainty in major countries like Germany and France poses challenges for effective policy formulation. In the second quarter of 2024, Germany and France reported saving rates above the eurozone average, at 21.23% and 17.08%, respectively, according to Eurostat.

Germany, in particular, has been a significant drag on European growth. The Forum’s report indicates that the German economy contracted by 0.1% quarter-on-quarter in the second quarter of 2024, marking its fourth contraction in two years.

As saving rates increase, household investment rates in Europe have declined. In the second quarter, the investment rate fell to 9.2%, down from 9.3% in the previous quarter and below the recent high of 10.3% in 2022. Meanwhile, gross disposable income rose by 0.8%. In a survey conducted by the Forum, nearly three-quarters of chief economists expressed expectations of weak growth in Europe for 2024, with the report stating, “Europe is the regional laggard once again.”

Despite this cautious outlook, respondents exhibit modest optimism for 2025. Approximately 53% expect moderate or better growth in 2025, compared to only 29% for 2024. The European Commission’s latest economic forecast projects 1% GDP growth for the European Union in 2024, improving to 1.6% in 2025.

“The EU economy has held steady in the face of exceptional challenges over the past years, and we can now look forward to a return to modest growth rates, picking up further in 2025,” stated Valdis Dombrovskis, the Commission’s Executive Vice-President for an Economy that Works for People. He cautioned, however, that the global landscape remains fraught with risks for the EU, particularly due to rising and persistent geopolitical tensions.

The Chief Economists Outlook also underscored that these geopolitical tensions present another potential source of macroeconomic shocks that continue to threaten economic growth across Europe