Why household deposits jumped in the four months – How May moves

By Leonidas Stergiou

The jump in private sector deposits (businesses and households) by 1.35 billion euros in April is mainly due to three groups of factors:

First, purely technical reasons related to movements of insurance companies in March and April, with disbursements of loans mainly to small businesses, with the Easter gift and with the day when salaries and pensions were paid.

Secondly, to restrain spending due to accuracy, the acquisition of units of mutual funds and other investments as there has been concern from the war and the prospect of rising interest rates.

Thirdly, the revenues from the increased tourism and the disbursements of small loans that in cases of individual enterprises etc can appear as household deposits.

According to bank executives, the total deposits of the private sector, ie businesses and households, in the four months, decreased by 2.1 billion euros. This results from a net negative flow of € 3.4 billion from businesses and a positive flow (net savings of € 691 million) from households.

Households

Households, after a negative January and a relatively stable February, saw a slight increase in net savings of € 200 million in March, which jumped to € 991 million in April.

The main reason for the jump in net savings in April, according to bank executives, is the day of payment of salaries and pensions. That is, the end of the month was Friday. Technically, the salary or pension may not be enough for the weekend either, however, accounting was credited on Friday (April 31st) and the full amount may have been spent on Saturday 1st May. It has been observed that when salaries and pensions are paid on Fridays or Thursdays, the system records accounting higher net savings each month. In March, the last day of the month was Thursday.

This phenomenon was more pronounced in April because it was preceded by the Easter gift (to those employees who are entitled to it).

At the same time, investment uncertainty led to acquisitions of mutual fund categories and other investments that appear in the system as private deposits (capital movements between financial companies and households or liquidation deposits, eg bonds, etc.).

In addition, in the four months and five months, loans of about 500 million euros were disbursed to medium, small and very small enterprises. Part of these loans and especially in the case of sole proprietorships, can appear in the category of private household deposits. An important part also comes from tourism (room rentals, etc.).

Finally, spending was restrained due to accuracy, while energy cost subsidies reduced outflows, which is expected to have a more positive effect in the coming months and especially after June (start of extension measures).

Businesses

In the business sector, deposits were mainly affected by a sharp outflow of about € 600 million from insurance companies in March, which is due to technical reasons and which is gradually returning (€ 273 million in April and so much more is expected in May) . There were also net outflows from businesses due to the preparation of the tourist season, rising liabilities from inflation, rising stock purchase costs and the launch of investment projects. The latter is also supported by the element of the increase of net debt by 1.5 billion euros in the five months.