Overall, private households in Germany have become richer again. Rising share prices and higher interest rates increased financial assets. The record value of 2021 is still a long way away.
Price gains on the stock exchanges and higher interest rates have made people in Germany richer overall. The financial assets of private households in Germany increased in the first three months of the current year compared to the previous quarter by 146 billion to around 7,393 billion euros, as announced by the Deutsche Bundesbank in Frankfurt.
The recovery that began in the final quarter of 2022 thus continued. Previously, financial assets had shrunk three quarters in a row. The sum is still a long way from the record value of 7,624 billion euros that was reached at the end of 2021.
Cash, securities, bank deposits and claims against insurance companies are taken into account in the figures, but not real estate. The data does not show exactly how wealth is distributed.
According to the Bundesbank, price gains on the stock exchanges had a positive impact in the first quarter of 2023. According to the information, the value of listed shares rose particularly sharply at 38 billion euros, especially compared to the first three quarters of 2022.
But investment funds and pension and insurance claims were also lucrative for their holders, with 25 billion euros and 19 billion euros respectively in valuation gains. In addition, plenty of fresh money flowed into bonds: the purchase of so-called bonds stood out with a historic high of 30 billion euros.
Nevertheless, stocks, bonds and fund shares make up the smallest part of financial assets with a total of almost 2000 billion euros. By far the largest part is cash and bank deposits such as overnight and time deposits. At the end of the first quarter, this item totaled almost 3.1 trillion euros.
Private households are increasing their time deposits – i.e. time deposits
However, in view of the turnaround in interest rates, many people shifted funds: For the first time since 2006, private households reduced their cash and deposit holdings overall, as the Bundesbank described – by 16 billion euros. While the cash holdings remained almost unchanged, sight deposits – i.e. money on current accounts that usually do not bear interest and overnight money – were reduced more than ever before at 56 billion euros. In return, private households increased their time deposits – i.e. time deposits – significantly by 45 billion euros.
Driven by extremely high inflation, the European Central Bank (ECB) increased interest rates in the euro area in July 2022 for the first time in eleven years. Because higher interest rates make loans more expensive, which slows demand and can counteract high inflation rates. The key interest rate at which banks can get fresh money from the ECB is now 4.0 percent. Banks are now getting 3.5 percent interest on money they park with the central bank. The unprecedented turnaround in interest rates has made savings attractive again for banks and savings banks. Many institutes advertise with new interest rates for fixed-term deposits and overnight money. A drop of bitterness for savers: The still comparatively high inflation eats away at interest income.
Source: Stern
