Consumers savings more again over economic fears
Published 11/08/2010 | 05:00
CONSUMERS are saving more because they are worried about economic conditions, a savings index from a building society shows.
The Nationwide UK (Ireland) Savings Index increased by four points in July.
It was the first time that the index has increased since it was launched in March of this year.
Managing director of the building society Brendan Synnott said people were reluctant to spend and instead were putting what money they could aside.
"This month we have seen the first increase in the savings index since we launched in March. One of the main drivers of the increase is that more people think it is a good time to save.
"This may relate to the further evidence of uncertainty about economic conditions and reflect the view that people are again becoming reluctant to spend because of this uncertainty. However, this is a one- month result and the August data will provide a clearer picture."
Although the majority of respondents think regular saving is important, only 40pc responded that they save on a regular basis.
Less than 10pc of people now think that government policy encourages saving, while half of those who responded felt that current policy discourages them from saving, an increase from 47pc in June.
Although the proportion feeling discouraged remains high, it is down from the 55pc high recorded in March.
When asked their preference as to how they might allocate any money over and above their everyday needs, 30pc of respondents would save their spare cash.
The majority would use the surplus to pay off debts, including their mortgage, while a further 11pc would spend the extra money. Meanwhile, the savings ratio is 10pc, according to Davy economist Rossa White.
The savings ratio measures savings and also takes account of the fact that people are paying down debt.
Mr White said he expects the savings ratio to settle at around 8pc to 9pc (compared with the 6pc average in 2001-2006) in the next few years as people continue to pay down debt.