MNI BRIEF: Covid Hit To Households Slow To Unwind - Bundesbank

Almost a quarter of German households lost earnings at the start of the Covid-19 crisis, a study published by the Bundesbank found, with lower-income households less able to absorb and offset the decline in income, leading to longer-term changes in spending and savings that could affect monetary policy transmission .

More than 40% of households reported financial losses early on in the pandemic, with 19% of all individuals experiencing a decline in wages or salaries. A further 19% reported only financial losses such as falling securities prices. Four per cent of respondents saw losses in both categories. Those most affected by loss of earnings expressed greater pessimism regarding increases in future income.

“These results could have important implications for the long-term impact of the coronavirus pandemic on households’ consumption and saving decisions, and thus influence the transmission of monetary policy measures,” the report’s authors concluded. “Events which individuals experience during a recession can have an impact on their consumption and investment behaviour far into the future.”