Here's an interesting question: when economy grows, what happens with the household deposits? The right answer is: it depends on a couple of factors:
- How long has economy been growing: if we have growth over a month or two, one can safely assume that households are using up cash to cover their short term debts accumulated over the course of the downturn. Indeed, Irish debts have been shrinking, not growing over the downturn - on aggregate - and growth has been ongoing for a long time now, at least in official accounts.
- What type of growth we are seeing: if economy grows outside the household sector, e.g. via corporate profits that do not 'trickle down' into the real economy in higher wages, etc, then deposits will not follow growth, although this effect too should be short-lived.
So what happened so far with irish households? Here's a chart:
Since Q1 2011, when the current Government came to office and promptly declared yet another economic turnaround miracle, Irish household deposits are down EUR2.08 billion or 2.23%. Worse, household deposits have been running at a flat trend since mid-2011.
Total private sector (excluding financial firms) deposits are currently only EUR1.289 billion ahead of Q1 2011 average - a miserly increase of just 1.13%. Given Irish firms and households are still pretty much abstaining from investing in the economy, this shows the current recovery to be almost entirely concentrated in the sectors that ship profits out of Ireland with the balance of domestic growth being fully consumed by the debt servicing and repayments.
Ah, and do note that any talk about 'rising deposits' in Irish banks that we occasionally hear from our politicians is down to one thing: inclusion of the credit unions' deposits into Central Bank statistics. As shown above, absent that, deposits still remain near crisis-period lows: household deposits today are only 1.1% above their crisis period lows, while non-financial corporates deposits are 1.22% above their crisis period lows. And as of July 2014, Irish household deposits fell in 3 months in a row. Just as growth 'accelerated'.