Published: February 09, 2010
US Consumers Are Changing Their Behavior: From Big Spender to Big Saver
MINNEAPOLIS - (BUSINESS WIRE) - The US savings rate could rise as high as 6% in the wake of the crisis,
according to a recent study by Allianz Group Economic Research. The
study examines how the recent dramatic reduction in household wealth is
affecting consumption and savings behavior. Some of the key findings
were:
-
Sharp decline in US households' net worth could trigger a lasting
increase in the saving rate up to 6%-6.5%, potentially significantly
expanding the need for guaranteed and safe savings solutions.
-
An estimated $700 billion per year could be saved in US in the next
10 years.
-
Saving patterns are set to change. US consumers are particularly
shy of risky assets.
Wealth destruction
US households have experienced an unprecedented decline in net wealth
from mid-2007 to early 2009. The fall in share prices and collapse in
home values had destroyed nearly $17.5 trillion of household wealth
while at its worst in the first quarter of 2009. With the stock market
rally that began last March and the stabilization of house prices, some
of these losses were made up by year-end 2009. Nevertheless, estimated
losses still amount to $11-12 trillion and the ratio of wealth to income
has fallen back to mid-1990s levels.
Given this loss of wealth, the economists at Allianz SE expect the
overall level of household savings in the US to rise by approximately
$500 billion annually. With disposable income currently equal to roughly
$11 trillion, this suggests that the saving rate is set to climb to
6-6.5%.
"We have witnessed a surge in the saving rate since early 2008, up to an
average of 4.6% in the 2009, said Allianz SE Chief Economist Michael
Heise. "We anticipate that products, such as mutual funds, annuities and
equities, will benefit from this change."
Implications for the net acquisition of financial assets
After 2009 when household purchases of financial assets were relatively
restrained, US households' annual acquisition of financial assets is set
to pick up again and amount to a range of $700-800 billion. Despite this
improvement, it is well below the average of almost $900 billion that
was invested annually in the five boom years of 2003 to 2007. Overall,
accumulation of financial assets as a ratio of disposable income is - on
average - 2 percentage points lower than in the period 1997-2008.
"One learning from the financial crisis is that it's not just about
asset allocation, but asset location. There is a definite need for
financial products that offer guaranteed lifetime income, and which we
view as the emerging fifth asset class," Allianz Life Insurance Company
of North America President and CEO Gary C. Bhojwani. "It goes beyond
saving for retirement; it's about planning how we want to live once we
do retire."
Structure of financial assets of private households
The Allianz study sees the composition of assets held by private
households changing quite significantly during the coming years.
In 2008, financial assets of private households declined by 17.8% over
the previous year reflecting mainly the fall in equity markets. Besides
the devaluation of existing assets, flows of most segments suffered
strongly as a result of the weak economy suppressing the acquisition of
financial assets.
In 2009, with the rebound of equity and bond markets more and more
households started to move out of cash and buying assets with higher
returns again. The beneficiaries were mutual funds and equities which
reported strong inflows, especially for corporate bond funds and
emerging market equity. And with less volatile equity markets, demand
for pension funds also revived slowly.
However, cash holdings by US households are still high compared to
pre-crisis levels. Checkable deposits stood at $332 billion at the end
of the third quarter 2009 compared to only $104 billion in the first
quarter of 2008.
"This "wait and see" strategy reflects the new cautiousness of US
consumers in financial matters. The days of free spending are gone for
good," said Heise. "We commissioned a survey in four countries (USA,
Germany, France and Italy) confirmed this new pattern. Contrary to the
image of former times, US consumers turned out to be the most thrifty
and cautious."
The survey also confirms that transparency and downshifting are the most
relevant trends emerging from the crisis. Ahead of European
counterparts, the US consumer is the most price sensitive when it comes
to the purchase of financial assets.
To receive the complete study, please contact Laurie Bauer.
These assessments are, as always, subject to the disclaimer provided
below.
About Allianz Life
Founded in 1896, Allianz Life Insurance Company of North America
("Allianz Life" ) provides an array of annuities and life insurance
products in the U.S. through a nationwide network of independent
distribution. The company is part of Allianz SE, a global financial
services organization that is the 20th largest company in the world
based on revenues (Fortune Global 500, August 2009), employing nearly
155,000 people worldwide. In New York, products are issued by Allianz
Life Insurance Company of New York, New York, NY. Both are part of
Allianz SE.
About Allianz
Allianz SE is member of Transparency International and supports the
Principles of the United Nations Global Compact and the OECD Guidelines
for Multinationals through its Code of Conduct.
Allianz SE is one of the leaders of the insurance sector in the Dow
Jones Sustainability Index, listed in FTSE4GOOD and in the Carbon
Disclosure Leadership Index (Carbon Disclosure Project, CDP6).
Cautionary Note Regarding Forward-Looking Statements
The statements contained herein may include statements of future
expectations and other forward-looking statements that are based on
management's current views and assumptions and involve known and unknown
risks and uncertainties that could cause actual results, performance or
events to differ materially from those expressed or implied in such
statements. In addition to statements which are forward-looking by
reason of context, the words "may", "will", "should", "expects",
"plans", "intends", "anticipates", "believes", "estimates", "predicts",
"potential", or "continue" and similar expressions identify
forward-looking statements. Actual results, performance or events may
differ materially from those in such statements due to, without
limitation, (i) general economic conditions, including in particular
economic conditions in the Allianz Group's core business and core
markets, (ii) performance of financial markets, including emerging
markets, and including market volatility, liquidity and credit events
(iii) the frequency and severity of insured loss events, including from
natural catastrophes and including the development of loss expenses,
(iv) mortality and morbidity levels and trends, (v) persistency levels,
(vi) the extent of credit defaults, (vii) interest rate levels, (viii)
currency exchange rates including the Euro/U.S. Dollar exchange rate,
(ix) changing levels of competition, (x) changes in laws and
regulations, including monetary convergence and the European Monetary
Union, (xi) changes in the policies of central banks and/or foreign
governments, (xii) the impact of acquisitions, including related
integration issues, (xiii) reorganization measures, and (xiv) general
competitive factors, in each case on a local, regional, national and/or
global basis. Many of these factors may be more likely to occur, or more
pronounced, as a result of terrorist activities and their consequences.
The matters discussed herein may also be affected by risks and
uncertainties described from time to time in Allianz SE's filings with
the U.S. Securities and Exchange Commission. The company assumes no
obligation to update any forward-looking statement.
Allianz
Laurie Bauer, 763-765-6174
laurie.bauer@allianzlife.com
or
Sabia
Schwarzer, 202-297-0372
Sabia.schwarzer@azoac.com
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