Sharply rising household savings, booming house prices, strong financial markets and unprecedented fiscal support have all contributed to unusually strong household balance sheets at the start of 2021, according to Oxford Economics. Consumers are still cautious but can now afford a spending spree.
Household savings rose in almost all major economies in 2020, thanks to both foregone spending during lockdowns and the fiscal support that compensated for lost labor income. This was especially true in the United States, but most other advanced economies also enjoyed both fiscal support and increased savings.
Helpful monetary policy and, in places, targeted fiscal policy have provided for a mini-boom in residential real estate prices. With strong financial markets, this made household sector equity rise strongly.
Pressured by their own weakening balance sheets, banks had begun to tighten credit standards by fall 2020 and are unlikely to change course soon. This will b