Strong household spending reduces saving

Households spent nearly every dollar of their income in the March 2022 quarter, as the ratio of saving to disposable income approached zero, Stats NZ said today.

This ratio has been at elevated levels since the June 2019 quarter including throughout the COVID-19-affected period.

Seasonally adjusted household saving in the March 2022 quarter decreased as a rise in disposable income was outpaced by continued growth in household spending. This decrease resulted in a return to the level of saving seen before the COVID-19 pandemic.

The March 2022 quarter saw household spending on final consumption increase by $3.3 billion to $53.8 billion. This 6.6 percent increase continued the rebound in spending seen in the December 2021 quarter, as COVID restrictions for the Delta outbreak were eased. The increase in household expenditure was driven by spending on services with small increases in spending on goods.

“During the pandemic, household saving was relatively high. Limited access to shops and services decreased household spending. At the same time, government subsidies supported household incomes. Saving decreased in the March 2022 quarter as household spending surged,” national accounts institutional sector senior manager Paul Pascoe said.

Household disposable income increased by 1.8 percent to $53.8 billion in the March 2022 quarter. This increase in household disposable income was driven by a 2.3 percent increase in compensation of employees and a 38.1 percent increase in interest income. These increases were partly offset by decreased returns from businesses with a 4.1 percent decrease in income from self-employed businesses and partnerships.