Over the last few years, households' decisions to consume and save have been affected by the uncertainty surrounding the economic situation. At the start of the crisis, households decided to increase their savings to be able to tackle any possible eventualities. The savings rate therefore rose sharply (from 8.3% in 2008 Q4 to 15.1%
in 2009 Q4) in detriment to private consumption which slumped much more than gross disposable income. Most of these savings were concentrated in liquid assets, readily available should they be required. In fact, the share of cash and deposits within households' financial balances went from 37% in 2007 to 50% in 2009 Q1.

Now that the recovery has begun, households have also started to consume again and have done so at a considerable rate, much more than the modest rise in their disposable income, leading to a sharp fall in the savings rate: in 2014 Q2 it stood at 9.1%. Nevertheless, in spite of saving a smaller proportion of their gross disposable income, households' stock of net financial assets has increased substantially in the last few quarters, reaching 1.1 trillion euros in 2014 Q2, an all-time high. This increase can be partly explained by a lower investment in real estate assets, falling by 67% since the peak reached in 2007 Q4. But it is also due to the higher value of financial assets and a reduction in financial liabilities through deleveraging. Consequently, households have high financial wealth overall although this is obviously not distributed evenly. Moreover the percentage of liquid assets in their financial balances, in spite of having fallen to 44%, is still higher than its pre-crisis level.

As the economic outlook improves and uncertainty dissipates, households are likely to start using the resources they accumulated during the years of crisis. When this happens, household consumption might surprise with higher growth than suggested by an environment of gradual recovery in the labour market and wage containment. To assess the potential scope of this phenomenon more accurately, we need a benchmark for the proportion of household savings set up as a precaution. One relatively simple and intuitive way to calculate this is by assuming that, if the macroeconomic context had been «normal» between 2009 and 2011, the savings rate would have remained at 11.5%, 1.9 pps below the actual average savings rate observed (13.4%).1 In this scenario of lower savings, the net financial wealth of households would be 50 billion euros lower than the current figure.

This buffer created by households during the years of recession, and which they still have, seems to be quite considerable. For example, a 1 pp fall in the savings rate over the next two years, equivalent to a reduction in financial wealth of approximately 20 billion euros, would result in a 0.8 pp increase in consumption per year. But the effect could be less if households decide to invest in real estate assets instead of consumption, a plausible hypothesis given the lower propensity to consume of wealthier households.

In short, although the recovery is expected to be gradual, different factors could accelerate this over the coming quarters. The use of resources accumulated by many households during the years of recession is one of these factors. However, for households to reduce their savings, it is crucial for the uncertainty still surrounding the macroeconomic scenario to diminish. Continual warnings of a possible third recession by several international organisations are not helping in this respect.

1. We assume a rate of 1.1 pps above the historical average (10.4%) to obtain a conservative benchmark. After the strong recession, households may have revised upwards the level of savings they want to maintain in order to tackle any eventualities.