Household debt falls to the lowest level since 1999

BarcelonaHousehold debt stood at 729 billion euros in the second quarter, 1.5% more than a year earlier, and its weight in the gross domestic product (GDP) fell to 41.9%, the lowest level since the third quarter of 1999. According to the financial accounts published by the Bank of Spain, companies also reduced the weight of their liabilities relative to the country's total wealth during this period. In this case, it stood at 1.077 trillion euros, 2% more than a year ago, but 61.9% of GDP, the lowest level since the third quarter of 2001. The fact that the wealth generated by the State has increased more than the liabilities of families and companies means that the contribution is reduced.

This downward trend was already noted in the data for the first quarter. All this coincided with the increase in savings and the drop in household and business spending during the outbreak of the covid pandemic in 2020, and reveals an increase in the net financial wealth of households, which is obtained from assets minus liabilities. In this case, it stood at 2.8 trillion euros, 161.8% of GDP, an increase of 12.2% and a level in absolute terms without precedent.

Regarding the evolution of financial asset balances, "a slight increase in equity holdings (shares) and investment funds is observed". Cash and bank deposits, the most widely used instruments by individuals, decreased. In any case, the sum of four quarters reflects a greater investment in household holdings in investment funds and in cash, bank deposits, insurance, and pension funds.

In cash and deposits there are 1.167 trillion euros, 3.5% more than a year earlier. These are the financial assets in which the most family resources are held. Their average remuneration in August (the last month for which there is data) was 0.16%, according to data from the Bank of Spain. This is money that is losing value, since inflation is currently at 4.9%.