Excessive savings of € 15 billion spur economic recovery, government officials say

About € 15 billion in additional pandemic-related savings are fueling the current rebound in consumption, senior government officials have been told.

In a presentation to coincide with the launch of the government’s fiscal strategy papers, Brendan O’Connor, head of economic research at the Department of Finance, said household deposits, an indicator of savings, had increased by $ 22 billion. euros during the pandemic.

About € 15 billion was “pandemic excess deposits” – that is, the growth of deposits above the pre-pandemic trend – he said, noting that this equated to around 15 billion euros. % of annual household consumption.

Consumer spending on goods and services jumped 12.6% in the second quarter of this year, as Level 5 restrictions eased and non-essential retail and hospitality reopened. This was one of the largest quarter-over-quarter increases in personal consumption on record.

Mr O’Connor warned, however, that the current recovery “remains sectorally uneven” with manufacturing, led by large pharmaceutical companies, and IT increasing production and boosting exports while domestic sectors of the world Hospitality and entertainment lagged pre-pandemic activity levels.

The rebound has led to a strong recovery in employment, he said, noting recipients of the Pandemic Unemployment Payment (PUP) had fallen 70% since their peak in 2020.


The total number of people receiving income support of one form or another fell from 1.2 million in the second quarter of last year to 625,000 in September of this year.

He said short-term indicators – purchasing managers’ indices (PMIs) and consumer sentiment – pointed to a further recovery in the third quarter of 2021, albeit at a more “modest” level.

In his presentation, Mr. O’Connor also highlighted the recent rise in inflation here and elsewhere.

Eurozone inflation jumped to a 10-year high of 3 percent in August, challenging the European Central Bank’s benign view on price growth, while inflation here also peaked 10-year rate of 2.8 percent due to rising costs for transportation, housing, restaurants and hotels. British inflation jumped to a nine-year high of 3.2 percent in August.

Mr. O’Connor described the main drivers of the current surge in price growth as imbalances between supply and demand associated with high consumer spending; rising costs associated with supply chain bottlenecks; and the basic effects of the previous period of confinement.

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