Where did the money go?

As we saw in an earlier post the CSO’s Institutional Sector Accounts revealed that households saved just over €11 billion in 2009.  What was done with this money?

To get a brief insight into this we can turn to the Financial Data on the household sector provided by the Central Bank.  Table A11.1 provides the figures for deposit by Irish residents by sector and category.  Here are the endpoints of 2009 (in €millions). 

Month	Deposits from Irish Households	Change
Jan 2009	97,684	-
Dec 2009	99,148	+1,464

At the start of 2009, Irish households had €97.7 billion on deposit.  During the course of a year in which €11 billion was saved, deposits of Irish households increased by just €1.5 billion.

Although the level of deposits remained relatively unchanged in 2009, there was some change in the type of deposits used by Irish households.


Over the year deposits in accounts with a maturity of up to two years fell from €37.1 billion in January to €31.5 billion.  At the same time deposits in accounts with notice periods of three months or less rose from €7.8 billion to €13.6 billion.  It seems households want to be in a position of having quicker access to their deposits.

So if households didn’t put the money that wasn’t spent on deposit where did it go?  To answer this we can turn to Table A5.1 with gives details of loans to Irish households.  Here again are the endpoints of 2009, in €millions.

Month	Loans to Irish Households	Change
Jan 2009	151,209	-
Dec 2009	140,085	-11,124

The total value of loans extended to Irish households fell by over €11 billion in 2009.  This €11.1 billion reduction was split across loans for house purchases (down €5.3 billion to €110.2 billion), consumer credit (down €5.2 billion to €23.8 billion), and other loans (down €0.7 billion to €6.1 billion).  The largest proportionate decrease was in consumer credit which fell by 17.9%, loans for house purchases fell 4.5% and other loans were down 10.4%.  It is likely that a significant portion of these reductions is due to repayments by households but some may be due to revaluations and write-offs.

Still, the pattern is pretty clear.  Most of the money saved in 2009 as indicated by the Household Sector Accounts was not used to build up deposits but was used to pay down debt.

If we extend this analysis through to the most recent September 2010 data we see that the patterns seen in 2009 have not carried through to 2010.

Month	Deposits from Irish Households	Change		Loans to Irish Households	Change
Dec 2009	99,148	-		140,085
Sep 2010	96,221	-2,927		139,096	-989

It appears, in fact, that the overall saving trend has reversed.  In 2010, household deposits have fallen by €2.9 billion while household loans have fallen by close to €1 billion.  This is indicative of dissaving rather than saving. 

The jump in the savings rate seen in 2009 may prove to be only a transitory effect.  And with retail sales now below last year’s level this suggests that household disposable income has dropped significantly in 2010.