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Spain Household savings falls to record low

Source: El Pais - Wed 9th Jan 2013
Spain Household savings falls  to record low

Spain's household savings rate fell to its lowest level on record inQ3 of 2012 as high unemployment and wage deflation in the latest recession obliged them to devote more of their disposable income to consumption, according to figures released Wednesday by the National Statistics Institute (INE).

The INE said that on a moving average over the period of Q4 of 2011 and Q3 of 2012, the savings rate in the latest quarter was down 0.6 percentage points at 8.8% from the previous quarter. The moving average is used to smooth out wide fluctuations in spending over the course of the year.

That was the lowest rate since the INE began compiling the statistical series in 2000. The rate reached a record high in 2009 as families put more income by in anticipation of a further deterioration in the economic situation, which proved to be the case. Output is estimated to have contracted 1.5% last year.

The main reason for the drop in Q3 was falling income. The INE said net disposable income in the period declined 1.6% from a year earlier to €164.675 billion. This in turn was the result of a 5.4% contraction in salaries and a fall in other sources of net income such as interest on bank deposits and share dividends of 4.4%.

At the same time household spending in the period increased 0.6% from a year earlier, resulting in a decrease in savings of 26.8% to €12.487 billion.

"These figures show that consumption is falling less than disposable income is, indicating that people are drawing on their savings to maintain consumption as best they can," Reuters quoted M&G Valores' director of analysis, Nicolás López, as saying.

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