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$5.4T savings cache could see rise in ‘big-ticket’ purchases

29 April 2021By Nic Robinson

A savings stash of $5.4 trillion amassed by households worldwide during the coronavirus pandemic is leading experts to predict a strong international economic uplift this year and a potential rise in luxury goods sales.

Most of the additional savings have been amassed by the wealthy and as a whole equates to 6% of global GDP, according to a report released by credit rating agency Moody’s Analytics.

The report coincides with an updated Oxford Economics GDP growth review, which claimed world GDP will rise a further 0.1 percentage point to 6.1% this year and 4.3% in 2021.

Sales of superyachts, however, are already on the rise and show an especially strong first quarter for 2021 with sales at 133, an increase of 42 for the same period last year when 91 yachts changed hands between January and March, BOAT Pro data showed.

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A more positive global economic outlook has emerged after a sharp fall in coronavirus cases in many countries, driven by lockdowns and vaccinations, as well as a desire for consumers to spend excess savings.

Although analysts do not expect wealthier groups to spend large sums in quick, instant bursts, there is a belief that once societies reopen and visits can be made to showrooms or ports, the second half of 2021 and beyond could see significant sums spent on luxury items.

“It might be that some very big-ticket items, even boats, could be an area that sees an increase, similarly with cars that people have wanted to try before they buy,” Oxford Economics global macro research director Ben May said.

People looking to buy an expensive item, such as a yacht, may have wanted to do so for some time, but consolidation during the pandemic had likely given them scope to do so, said May.

“Some of the bigger spends might not have happened yet or might not happen until more restrictions around the world lift,” May added.

Record superyacht sales

“But during the pandemic things like expensive holidays have stopped, so you could see more people spending on bigger items now they have the additional money.”

However, the super-rich appear to have already begun buying big-ticket items, with BOAT Pro data showing a significant number of superyacht orders in the pipeline and 2021 brokerage sales at record levels.

This follows a bumper month of brokerage activity in December 2020, which saw the second strongest single month of brokerage sales since 2009 with a total of 57 yachts changing hands over the month.

More orders and sales are expected, especially as Americans amassed the largest sum of extra savings, equating to $2.6T or 12% of US GDP, while Brits’ excess savings compares to 10% of the country’s total GDP, according to Moody’s Analytics.

Additional consumer spending power in the States could be another positive signal for the country’s superyacht sector as US buyers already account for around half of the boat sales market.

Extra savings are as a result of lockdowns, particularly in North America and Europe, as well as financial support from local governments given to counteract financial difficulties felt by businesses during the pandemic.

Global governments’ financial support for businesses amounted to in $19.5T, the International Monetary Fund claimed in November 2020.

It is expected over 30% of excess savings will be spent in 2021, Moody’s chief economist Mark Zandi said.

“The combination of an unleashing of significant pent-up demand and overflowing excess saving will drive a surge in consumer spending across the globe as countries approach herd immunity and open up,” he continued.

A third of global excess savings spend in 2021

“We expect approximately one-third of the global excess savings will be spent this year, adding just over two percentage points to global GDP growth.”

He continued: “Very high-income households are more likely not to spend the excess savings. They will treat it as wealth, but what they do spend will likely be on luxury and other discretionary items.”

Research and Markets’ recent Global Economic Recovery in Post-Pandemic 2021 report also predicted a healthy international bounce back.

Breaking it down into countries, the report claimed the US was likely to see 4.4% GDP growth this year, while China was likely to witness a healthy 8% uptick.

Outperforming both was India, which was predicted to see GDP rise by 10.9%, however, analysts may revise this figure after the country’s recent and unfortunate rise in coronavirus cases and deaths.

“Recovery will be the keyword going into 2021, in the light of continued easing up of restrictions, vaccine administration, and demand-side revival,” the report said.

“Global growth is expected to accelerate to 5.3% in 2021 and the pace of recovery is expected to be much stronger for the group of emerging markets and developed economies, especially supported by high growth rates for China and India.”

Meanwhile, the recently published Wealth-X report showed wealth among those with very high net worth (VHNW) in North America and Asia grew during the pandemic.

One in 10 of the world’s millionaires is considered as VHNW individual with a net worth of between $5M and $30M, while VHNW wealth will grow by 7.4% on average each year, the report claimed.

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