We have enough money
A number of interesting facts emerge from the statistics of preliminary financial accounts published by the MNB on Friday. Based on the raw data, apparently everything is fine and dandy: for the first time, the stock of gross financial assets of families (that is, not reduced by debt) exceeded 80,000 billion, and increased by 9.4% in one year.
However, if we look behind the numbers, the picture is not so bright. In the third quarter, so few new financial assets were formed (109 billion HUF net transactions), which has not been seen since the beginning of 2015.
We have selected from the statistics the financial instruments that can be considered as savings. Based on this, since the end of last year, compared to 12.4% for the whole year last year, the stock of savings increased by only 3.8% in the first nine months of this year. And if we correct the numbers with the inflation that took place between December last year and the end of September this year, we see an 11.7% decrease in the real value of savings.
What is our money in?
The population keeps most of their money in current accounts, after the priority of government securities was taken back in 2021. In second place is government securities, and in third place is cash. Of the three, the cash stock has grown the most so far this year, while the stock of government securities has already decreased.
This year, the population sold almost HUF 400 billion more in government securities than they bought. On the other hand, out of 100 new forints, 35 forints went into investment certificates, 25 into cash, 24 into stock exchange shares, and 16 into current accounts, while 20 forints left the government securities market.
However, it can be clearly seen in the diagram below that the upswing in sales at fund managers and brokerage firms was not accompanied by positive average returns: from a revaluation point of view, the population made a significant (mainly unrealized) loss on the stock market, and a smaller one on investment funds. Unfortunately, pension fund savings and life insurance were not left out of this negative trend.
There are no complaints about the sale of life insurance: in the first three quarters, more money flowed into them than at any time in the whole year since 2008, and there is a good chance that last year’s performance will be surpassed. The same cannot be said for pension funds, but they are now doing better compared to, for example, the last year before the epidemic, 2019.
One of the biggest stories of the third quarter can be clearly seen in black on the diagram below: a part of the investors shifted weight from government securities to investment funds. This can obviously be explained by the fact that the ÁKK adjusted its retail government securities offer relatively late, only at the end of September, so this step did not “save” the third quarter net sales numbers. At the same time, the government reacted to the loss of government securities and the rise of investment funds with its announcement on Monday limiting deposit interest rates:
The effect of inflation on savings
As we wrote about earlier, the direct first-round effect is twofold:
- The real value of the existing savings stock decreases, that is, the savings are worth less and less when we want to use them for consumption or investment (e.g. home renovation).
- When goods become more expensive, it is not worth postponing consumption, consumption and investment goods cost more and more, so less can be saved from the same income (flow). The proportion of income spent on savings (savings rate) decreases, and it can easily turn into a negative range, that is, we begin to recover our savings. A negative savings flow also means a nominally decreasing stock.
The MNB shows the latter phenomenon in its latest Inflation Report shown below, on the basis of which the savings rate is already decreasing: it is currently around 7% compared to the 9-10% typical for the whole of last year. It will reach its lowest point around 5% next year.
Cover image: Getty Images
Source: Portfolio.hu – Befektetés by www.portfolio.hu.
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