Household savings shrink for the first time in the pandemic

Brazilian household savings shrank in the first quarter of 2022, the first negative change since the beginning of the pandemic. Factors such as the fall in Brazilian income, the cooling of the health crisis and the return to the pre-Covid consumption pattern are among the explanations for this movement.

The balance of accumulated financial savings fell from R$529.6 billion to R$497.1 billion, a reduction of R$32.4 billion (or 6.1%) in relation to December 2021, according to a survey by Cemec- Fipe (Center for Capital Market Studies of the Economic Research Institute Foundation).

The data consider several ways to save resources, such as passbooks, investment funds and stocks.

According to the institution, a possible explanation for the drop in financial savings is that the control of the pandemic led to the easing of social distancing and reduced uncertainty, so that families began to gradually return to the previous pattern of consumption.

In the event that the first quarter results indicate the beginning of a process of using accumulated savings to reinforce demand, says Cemec, this movement has the potential to change consumption and GDP projections for 2022. The accumulated balance represents about 9% of total consumption in 2021.

The most recent data from the IBGE showed that household consumption advanced in the first quarter, surpassing the pre-pandemic level, and helped to ensure GDP (Gross Domestic Product) growth in the period. The rise in inflation, however, is a threat to this movement.

Cemec also registered a change in the profile of these financial investments, with the migration of funds from passbooks, investment funds and shares to other fixed income assets, led by bank funding securities (LF, LCA, LCI), term deposits, of private debt and government bonds.

Looking only at the booklet, lower-income families had already started this savings reduction process last year, which may reflect the use of these resources to supplement the household budget, pressured by the sharp rise in the prices of basic items, according to Cemec.

In the higher value ranges, negative variations began to be seen in the first quarter of 2022. ​“The hypothesis is that most of the fall in the savings balance of families with higher balances ranges was reallocated to more profitable fixed income investments , favored by the increase in the interest rate.”