| Period | Savings Ratio (%) |
|---|---|
| 2018 Q1 | 5.2 |
| 2018 Q4 | 4.8 |
| 2019 Q1 | 5.0 |
| 2019 Q4 | 5.2 |
| 2020 Q1 | 9.3 |
| 2020 Q2 | 23.4 |
| 2020 Q3 | 15.1 |
| 2020 Q4 | 14.3 |
| 2021 Q1 | 18.2 |
| 2021 Q2 | 12.1 |
| 2021 Q3 | 10.5 |
| 2021 Q4 | 6.8 |
Note: The household savings ratio is household savings expressed as a percentage of total household disposable income.
Recent economic data show that the rate at which households are saving reached unprecedented heights during the COVID-19 pandemic, peaking at over 23% in mid-2020 before falling back rapidly as inflation and living costs spiked.
The initial surge was driven by 'forced savings' as consumer spending opportunities in hospitality, travel, and high-street retail were heavily restricted by government lockdowns, alongside precautionary savings prompted by widespread economic uncertainty. Conversely, the subsequent drop in the savings ratio indicates that, as inflation began to erode real disposable incomes, many households had to reduce their ongoing saving rates or dip into existing reserves just to maintain their standard of living. However, saving behaviour remains highly unequal; some households may respond to shifts in consumer confidence or prospective interest rate changes by choosing to accumulate funds, while others are driven primarily by the need to secure a pension for retirement.
Extract E states that 'the rate at which households are saving reached unprecedented heights... before falling back rapidly'.
Explain two determinants of saving by households.
