If however these savings are being accumulated because people can’t spend their income due to the restrictions in place, or so called “deferred spending” these savings may be viewed as “extra income”. In this instance, research suggests that roughly half of these savings may be spent or consumed, which would suggest a boost to domestic demand.
It also matters who spends/saves, evidence suggests higher income households spend more in “restricted sectors”, which suggests more of the excess savings are concentrated in higher income households. [Slide 10/11] The latest analysis suggests that the “pandemic savings” are more likely to be deferred spending than precautionary in nature.