According to our preliminary calculations, the volume of monetary assets held by German households probably increased last year by EUR 230 bn to EUR 5.7 trillion. At 4.1 per cent this increase was only slightly smaller than that recorded in the previous year. Share price increases supported the trend: the DAX rose strongly in the year-end rally and ended up 6.9 per cent higher. Although German investors pay less heed to shares, equity-based mutual funds and certificates than investors in other countries, share price gains still contributed around EUR 44 bn to asset growth. Besides this, it was mainly the Germans’ ongoing thrift that was responsible for the asset growth: supported by good income growth, the saving rate probably increased from 9.7 to 9.8 per cent in 2016.
Even though the poor interest rate environment is not putting Germans off saving, the extremely low interest rates are nevertheless having a considerable influence on their investment behaviour: the acquisition of non-monetary assets in the form of real estate, for example, is becoming more and more important. German households again invested more in “concrete gold” in 2016. With respect to the acquisition of monetary assets, German citizens have been holding back increasingly with investments for some time now. In international terms, Germans are rather risk-averse anyway, but because of the low interest rates households are also not prepared to invest long term at fixed rates. For this reason, an increasingly large share of their investments is in sight deposits and other forms of overnight money. In the meantime, almost one quarter of total monetary assets is parked in funds that can be withdrawn on demand. On the other hand, medium to long-term deposits and bonds are becoming less and less important.
Investment conditions will change little in 2017: for example, German GDP growth of 1.2 per cent may be expected, which is still solid – but weaker than in 2016. Inflation will probably accelerate to around one and a half per cent, but it is still likely to remain low in the long-term comparison and with respect to the ECB’s inflation target. Nevertheless, the very low interest rates will continue to pose a challenge for monetary investments. The prolongation of the ECB’s bond purchasing programme plays a role here, which means that interest rates are likely to rise at most slightly in 2017. With German consumers continuing to show an appetite for spending despite gradually rising prices, the saving rate is unlikely to increase again this year. However, a larger part of consumers’ savings is likely to go into the acquisition of non-monetary assets. This is indicated by the steep increase in home building permits. On the other hand, monetary assets will probably grow more slowly – by around 1.5 per cent to EUR 196 bn.
The growth of monetary assets is therefore subject to conditions similar to those seen in 2016: a notable return on investments is hardly to be had any more. Although the saving rate remains stable, savings are increasingly going into real estate. The extent to which monetary wealth growth will slow also depends greatly on the future performance of equities. Despite the uncertainty, one may be moderately optimistic here owing to the state of the German economy. Overall, we expect household monetary assets to continue to grow sluggishly, rising 3.8 per cent to around EUR 6.0 trillion by the end of 2017.