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Jul 18, 2006
The UK saving ratio has
reached a four year high of 6.0% in Q1 2006, according to research conducted by
Halifax. Using
ONS data for analysis, Halifax
found that the savings ratio has fluctuated from a high of 14.1% in 1979 to a low
of 3.1% in mid 2004. Despite reaching its highest point since Q4 2001 in the
last quarter, the savings ratio is still more than 1.5 percentage points below
the 7.8% average for the last 43 years.
In absolute terms, household savings hit £12.9 billion in Q1 2006, the
highest level since Q4 1997. Over the past year household savings have totalled
£44.1 billion, well above the corresponding figure for a year ago (£29 billion).
The study found that movements in the saving ratio are highly cyclical,
with the ratio reaching cyclical lows in 1971 (4.1%), 1988 (4.0%) and 2004
(3.1%). On the contrary, Halifax found two cyclical
peaks in the saving ratio since the early 1960s: 1979 (14.1%) and 1992 (13.5%).
These changes are associated with the UK economic cycle, with the savings
rate has been at its highest when the economy was in recession and unemployment
was high. Periods of economic buoyancy -
such as the late 1980's and around the year 2000 - have been accompanied by a very
low savings ratio.
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