L’AGEFI – Saving surprises

Translation of an article published by L’AGEFI on 6 November 2025
By Michala Marcussen, Group Chief Economist

Changes in household savings behaviour have proven a frequent source of surprise to economic forecasters in the post-pandemic world. Whether it is the euro area’s recent renewed increase, China’s stubbornly high level or the now limited buffer provided in the US, the dynamics of household savings will be key in shaping the economic outlook and shifts in global balances looking ahead.

Looking first at the euro area, we find that the theme of a falling household savings rate remains a key driver of private consumption in many economic forecasts. Just zooming in on the latest ECB staff projections from September, we observe a pathway of 15.0% in 2024, 14.8% in 2025, to 14.5% in 2026 and 14.0% in 2027, entailing a lift to private consumption from the savings channel of 0.2pp, 0.3pp and 0.5pp, respectively, in 2025, 2026 and 2027. However, as noted by President Lagarde during the press conference after the 30 October Governing Council, euro area households continue to save an unusually large proportion of their incomes. Recently released data from Eurostat indeed show an average household savings rate of 15.3% during the first half of 2025, pointing to an upward revision in the next edition of the ECB staff projections and for that matter many other forecasts.

The puzzle of a high savings rate in the euro area is not new, having significant exceeded the pre-pandemic decade average of 12.5% in recent years. Several factors have been advanced to explain this, including efforts to rebuild net wealth following the inflation surge, the lure of higher interest rates, real labour income gains driven by falling inflation and the composition of income, with a tilt towards non-wage income that comes with a higher propensity to save. Consumer confidence naturally also weighs in, but analysis from the ECB shows that the unexplained portion of the household savings rate gains has increased in the course of 2025. Some clues may nonetheless be found in the geographical breakdown. For example, there has been a sharp increase in France, which, given the heightened political uncertainty and major questions surrounding the future of pensions, taxation and social benefits, comes as no surprise. It is also a warning that a continued lack of clarity will likely see new disappointments to the French growth outlook. Across the Rhine, the picture is quite different with recent quarters delivering the expected decline. With the German savings rate now close to its pre-pandemic average, a further lift to household consumption from this source seems less likely.

One-third of income saved in China

While European households may have a reputation for high savings, this pales in comparison to China where households save just over a third of their incomes, and this despite recent years government support measures. The main motivations for the high saving rate in China, however, differs quite substantially from the euro area with precautionary savings and access to housing as dominant drives. In contrast to Europe, where social safety nets lower the need for self-insurance, Chinese households must save to ensure adequate coverage for healthcare, education, retirement and unemployment coverage. Unlocking Chinese household savings thus requires deep rooted reform that are not presently sufficient included in the policy plan.

In discussing precautionary motives, it is worth recalling that climate change could also become an important driver of such behaviours, and this at the global level, as more frequent and severe extreme weather events erode insurance coverage and see already stretched public budget cover only a bare minimum.

Turning to the US, households were quick to return savings to prepandemic levels, with a related welcome boost to consumption. Looking ahead, this already relatively low savings rate, standing at 4.6% in August, also leaves US households with a limited buffer in the event of an adverse economic development, such as a deteriorating labour market and/or a sharp adjustment to asset prices. While individual households may try to lift precautionary savings in a downturn, they often struggle to succeed in aggregate as incomes decline. A further irony in the present situation is that absorbing the very large US current account deficit requires a sharp upward adjustment to internal saving balances. This can come from either households, businesses or the public sector. With little appetite for sharp fiscal tightening, and policies pushing businesses to investment the irony is that a sharp adjustment to the US current account requires a much higher household savings rate, which seems highly at the current juncture.

The irony at present is that the best chance for an upward surprise to private consumption amongst the major economies resides with French consumer behaviour. At 18.94% in the second quarter of 2025, the French household savings rate stands at nearly 3.5pp above the average of the prepandemic decade. To our minds unlocking this substantial potential requires a credible fiscal outlook, which will be hard to achieve with reduced visibility on the future pension landscape, and a more political fiscal environment. Hope is nonetheless to stem further increased in the household savings ratio, which is the risk should the situation deteriorate further.