The above applies provided the increase in asset prices is maintained. Since share prices turned upwards in the autumn of 1992, the increase on the Stockholm Exchange has been one of the largest since the early 1920s, which is as far back as the statistics go. The overall valuation of corporate profits is also historically high. The present level of share prices calls for a further rapid increase in profits for several years to come. Minor changes in this picture of the future could affect current share prices. Another element of uncertainty concerns the economy’s supply side. We cannot be sure of just how much the economy can produce without an increase in inflation. Moreover, it is not only the total reserve of resources that may affect inflation. The rate at which resource utilisation rises may also be important. A rapid activation of the unutilised resources could generate stronger inflationary impulses even if surplus capacity still exists at total level. CPI inflation has moved up sharply during 1997. The 12-month change was down around 0 per cent for a couple of months last spring but after that it moved up fairly quickly to 1.9 per cent for September. In September alone the CPI rose 0.9 per cent, which was more than most observers had expected. The figure also aroused some uncertainty among savers and investors. The question is whether the increase in inflation represents a new and unforeseen tendency. The main features of this development are not unexpected.
These trends show that the propensity to save and retain the funds in the banking system remains high. Household savings are growing dynamically, within the historical trends. However, the unique character of the crisis has implications on its structure. Given the unpredictability, the propensity for long-term savings is decreasing, while the share of these deposits in the total household deposits from April last year until now reduced by five percentage points. On the other hand, in the corporate sector, the growth rates are significantly above the historical average, with restraint from investment activity and growth of assets. The past crisis episodes were characterized by a reduction in corporate deposits, which shows that the corona-crisis prompts different behavior. The pandemic increases the propensity to hold liquidity and save, in conditions of pronounced and prolonged unpredictability. Besides the growth of savings in banks, in conditions of a pandemic, there is an increasing propensity of households to invest in real estate. Actually, in conditions of low interest rates, relatively stable disposable income, reduced possibilities and needs for consumption, change in the models of work, globally there is an increase in the demand for real estate and in the real estate prices. Unlike most economic indicators, which collapsed during the pandemic, real estate prices are increasing. In the EU countries, in the first half of this year, real estate prices registered an average growth of nearly 7%, compared with the growth of around 4% in the past few years.