UK household savings lowest since 1960
The Office of National Statistics has reported that household saving in the UK has dropped to 2.1 percent in the first quarter of 2007.
That level of saving is the lowest recorded since 1960. This was a decline from the fourth quarter of 2006, when the household saving ratio was at 3.9 percent.
The household saving ratio is the portion of a household’s disposable income that goes unspent by consumers. Overall in 2006 household savings was at 5 percent, while it was at 5.6 percent in 2005.
According to the ONS, the decline came on a gain in tax and interest payments as well as higher consumption spending.
Analysts were concerned by the numbers, saying that they show how stretched household finances have become and that it is likely that consumption will have to decline for savings to increase, since interest rates are likely to rise again soon and debt levels are rising.
Consumer spending has nevertheless shown few signs of declining, helping to create an environment in which the Bank of England is expected to raise rates even more soon.