Changes in household saving and consumption in Spain during the crisis

Since the onset of the crisis, Spanish households have addressed consumption, saving and financing decisions against a very adverse macroeconomic backdrop, characterised by a high degree of uncertainty. In this setting, the household saving rate, as a percentage of their disposable income, has fluctuated very markedly during recent years. Thus, after following a stable pattern during most of the previous upturn, fluctuating moderately around 11% of disposable income, the saving rate increased by 7.4 percentage points (pp) between 2008 and 2009 to 17.8% in 2009. Conversely, since 2010, this rate has fallen very sharply to stand at 8.2% of disposable income at end-2012 (see Chart 1). The decline in the saving rate in Spain since 2009 has not been an isolated phenomenon in the euro area where other countries have also shown a trend towards a lower level of saving, especially certain countries subject to a high degree of macro-financial uncertainty such as Ireland and Italy (see Chart 1). In Italy, the saving rate has held on a downward path since 2006, to stand at end-2012 below the euro area average in a setting in which the main income components have fallen back notably. Like Spain, in Ireland and in Portugal the saving rate picked up temporarily during the early stages of the crisis and subsequently decreased in 2010 and 2011, to then recover slightly in both cases in 2012. By contrast, in Germany and France gross disposable income has continued to grow in the more recent phase of the crisis, which has enabled the saving rate to hold at relatively stable levels that are generally higher than those seen in the peripheral economies. Such sharp fluctuations in the Spanish household saving rate during the crisis suggest the presence of several factors, with countervailing influences on this variable. The relative strength of these factors has varied during these years. They include two particularly relevant factors: household disposable income and the sensitivity of consumption to changes in households’ real spending capacity. This article analyses how these two determinants have combined in the most recent period to prompt the saving rate to fall to historically low levels. With this objective, section 2 documents the decline of the saving rate which has followed the contraction of household disposable income since 2010, by using both aggregate consumption and saving series as well as data on households relating to income, consumption and employment status, among other things. Section 3 analyses the possible rigidities of consumer spending on certain goods and services which may occur faced with sharp reductions in income, taking into account in this regard the degree of necessity of the various consumption categories. The main conclusions are summarised in the last section of the article.