Germans’ Saving Habits May Be Hurting the Economy
December 6, 2019
As American manufacturing has slowed, personal consumption has kept the economy growing. Germany is facing a similar slowdown in manufacturing, but German citizens seem unwilling to open their wallets. A recent feature from the Wall Street Journal suggests that this could mean trouble for economic growth in the nation, and possibly Europe as a whole.
Saving is viewed as a tradition and virtue in Germany. The nation has one of the highest savings rates in the world. In 2019, Germans devoted nearly 11 percent of their household income to savings. This is compared to about 9 percent in America, 7 percent in Australia, and just 0.3 percent in the U.K. Unfortunately, in a world of excessively low interest rates, this does not create wealth. Germany’s median household wealth is just $67,000, less than Greece’s.
Even with low-interest rates, Germans view the assets that have appreciated, like stocks and real estate, as too risky. Only one-in-ten households in Germany own stocks. Thrift and frugality extend even to German corporations, which is not helping matters. In July, the IMF issued a warning that Germany’s high corporate savings were increasing inequality, due to the low rate of stock ownership and high concentration of business ownership.