Since Covid, Americans and Europeans handle money very differently, and for good reason

After the coronavirus, EU and US residents have completely disconnected from how much they spend and how much they put aside. While Europeans have saved unusually large sums of money in recent years due to the Russian-Ukrainian and Israeli-Palestinian wars, Americans are spending their money more calmly. Writes the Financial Times.

Based on Eurostat data, before the coronavirus pandemic, eurozone residents saved an average of 12.3 percent of their income. This rate rose during Covid and then began to decline, but has now risen to another three-year high with a savings rate of 15.7 per cent.

Americans' saving rate – calculated using a different methodology – was 6.1% on average between 2010 and 2019. This ratio rose during the coronavirus epidemic, then began to decline, falling to 5.2% in the second quarter of this year – roughly a third of the European value.

Mark Zandi, head of Moody's Analytics, said: “Americans put aside less that contributed to increased consumption, which is the main driver of American economic growth and one of the most important reasons why the American economy is growing faster than the European economy.” Thus, the American consumer pulled the train of the global economy.”

According to the latest OECD estimates, the US economy will grow by 2.6 percent this year, while the euro zone economy will grow by only 0.7 percent. Zandi adds that the number of people who own stocks in the United States is much greater than their number in Europe, and since American stock prices rose very quickly in previous years, the wealth of many people also increased.

Another important difference is that Europeans usually buy apartments with short-term mortgages, which means that they have to spend a relatively large amount on repayment. In America, many people obtain housing loans for a period ranging between 15 and 30 years at record low interest rates, and repaying them consumes a small portion of their income.

According to Simon McAdam, an economist at consultancy Capital Economics, European households have recovered most of the savings accumulated during the coronavirus lockdowns in recent years. According to analysts, Europeans are being very cautious due to the weakness of the German economy and fear of escalating conflict in the Middle East, Russia and Ukraine.

It is possible to see this phenomenon affecting the whole of Europe in Hungary as well: in recent years, excluding inflation, salaries in Hungary have consistently risen by 10-15%, while retail sales have not risen, but often fallen. We wrote about the causes and consequences of this in more detail in this article.