Households in the US and Europe massively increased their saving rates during the Covid-19 pandemic (Figure 1, left-hand side). While their incomes were supported by fiscal policy, they slashed their spending on discretionary services. Much of this extra saving went into liquid assets such as deposits. These huge stockpiles – around $4 tn in total – are largely intact (Figure 1, right-hand side).
If households use these stockpiles to support spending through the current surge in living costs, this could help avert a recession. However, excess savings are concentrated in the top half of the income distribution, and inflation will still squeeze hard on the spending power of poorer households. Furthermore, spending on services may be the main beneficiary of higher spending by richer consumers, limiting the upside for commodity demand.
These and other economic developments that impact commodity markets are discussed with CRU subscribers regularly. To enquire about CRU services or to discuss this topic in detail, get in touch with us.
CRU experts discussed the impact of the war in Ukraine on commodity markets in a recent webinar. Experts from all major commodity areas joined CRU’s Head of Economics and an energy specialist to discuss markets one month on from the invasion of Ukraine. The webinar is available to watch on-demand here.