Consumers in the world’s largest economies amassed US$2.9 trillion in extra savings during COVID-related lockdowns, a vast cash hoard that creates the potential for a powerful recovery from the pandemic recession.

Households in the U.S., China, U.K., Japan and the biggest euro-area nations socked money away when forced by the coronavirus to stay home and out of the shops, according to estimates by Bloomberg Economics. They are likely continuing to do so as restrictions remain and governments dole out stimulus.

Half that total — US$1.5 trillion and growing — is in the U.S. alone, the data show. That’s at least double the average annual growth of gross domestic product witnessed in the last expansion and equivalent to the annual output of South Korea.

Such savings should provide fuel for economies to rebound once COVID-19 is finally wrestled under control and as vaccines roll out.

The optimists are betting on a shopping spree as people return to retailers, restaurants, entertainment venues, tourist hot spots and sports events as well as accelerate those big-ticket purchases they held back on. Those who are less confident wonder if the money will instead be used to cover debts or hoarded until the health crisis passes and labor markets look stronger.

In the U.S., a running down of all the money saved in the past year would propel economic growth to as much as 9 per cent rather than the 4.6 per cent currently projected for 2021 GDP, according to BE. By contrast, if the savings go unspent, the economy will likely grow just 2.2 per cent.

“Summer 2020 turned out to be a false dawn, but it also showed how quickly economies can bounce back when COVID-19 controls are removed,” said Maeva Cousin, senior euro-area economist at Bloomberg Economics. “Could the same thing happen in 2021? Massive cash buffers from households’ lockdown savings are one reason we are confident demand should rebound sharply.”

The U.S. is not alone in enjoying a cushion. Chinese households poured 2.8 trillion yuan (US$430 billion) more into their bank accounts than they might have done normally. Similar deposits rose 32.6 trillion yen (US$300 billion) in Japan and 117 billion pounds (US$160 billion) in the U.K. Those in the biggest euro-area economies climbed a combined 387 billion euros (US$465 billion), led by Germany’s 142 billion euros.

One factor that might increase the urge to splurge: Low interest rates that reduce the appeal of keeping funds in the bank.

Pulling in the other direction is the risk is that people choose to use their savings to pay down debt or decide to preserve their household budgets because of ongoing health risks or concern that the jobs market will recover sluggishly.

Not everyone will be feeling flush. It’s those who earn the most who will likely have stockpiled, while lower-income households may have been forced to dip into their savings already and are the most likely to consume.

Some may be put off by the suspicion that at some point governments will jack up taxes to pay for their rescue programs.

“Short term, a lot depends on post-pandemic behavior — which may take time to revert to pre-pandemic norms,” said Yelena Shulyatyeva, senior U.S. economist for Bloomberg Economics. “Medium term, whether the extra funds go to consumption, paying down debt, or even stay in the bank as a rainy-day fund, that’s a positive for growth.”

--With assistance from Jeremy Cf Lin and Chloe Whiteaker.