Weekly Economic Briefing

Another savings glut?

21 April 2015

Global Overview

  • Aggregate saving behaviour plays a key role in the business cycle. If increased private sector savings are not offset by fiscal policy the results can be painful, as found in a number of Eurozone member states.
  • The public sector has broadly fulfilled this countercyclical role in both the US and the UK in the aftermath of the financial crisis. This has helped reduce the fallout from increased desired savings in the private sector.
  • Excess saving in China during the 2000s triggered a ‘savings glut’, with domestic savings exported into the global economy. New evidence suggests that demographics and income growth were responsible for high savings rates.
  • There is some concern that the global economy is suffering from another savings glut due to excess savings in the Eurozone, primarily Germany. The longevity of this trend will have important implications for global interest rates.
  • Household saving rates in Japan have fallen and Abenomics is trying to persuade corporates to be more expansive. This raises questions over who will fund Japan’s large fiscal deficit over the long term.


Following a long running reduction in savings rates there is evidence that US households are becoming more thrifty.



The UK has an unusually large gap between domestic savings and investment, financed by a large current account deficit. A continued decline in the fiscal deficit should help to reduce this.



The Eurozone looks to have learnt its lesson that a simultaneous push towards private and public sector deleveraging can be extremely painful.



Japan’s household savings rate has turned negative. This will have implications for the sustainability of public debt and the current account position.


Emerging Markets

China’s high household savings rate is complex. Changing demographics and rapidly rising incomes stand out as the primary causes for the sharp increase in savings.


Standard Life Investments’ Global Strategy team provide regular analysis of the key economic data that has been influencing financial markets.

Available on a weekly basis, the Weekly Economic Briefing takes a detailed look at the global economic issues that have been impacting our investment strategy. The regional approach aims to provide an easy-to-navigate guide to the most recent developments in the global economy.

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