Households increase savings despite falling real incomes

The economy contracted by more than we previously thought in Q3 2022. But the most surprising thing we learnt was that the saving rate leapt from 6.7% in Q2 to 9.0% in Q3 as households on aggregate increased precautionary savings and reduced spending, despite a fall in real incomes. While we currently forecast consumer spending to fall by less than real incomes, further increases in savings could mean consumer spending, and therefore real GDP, falls by more than we expect during the recession.

This will be the last UK Economics Weekly for 2022. The next Weekly will be sent on Friday 6th January 2023.