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Danes are richer than ever, so why are they sitting on their wealth?

The gap between private consumption and household wealth is the biggest it's been in three decades in Denmark

Frances Schwartzkopff | Bloomberg 

Denmark, Denmark economy, Danes,, Denmark financial crisis, Denmark people
Copenhagen, Denmark (representational image)

In the world-record holder of negative rates, there’s been another eye-catching development.

are richer than ever before, according to data on savings and home equity. But they’re spending less, in relative terms. The gap between and household wealth is the biggest it’s been in three decades.

The development has economists scratching their heads, in part because it’s cheaper than ever to borrow after six years of negative interest rates.

“It’s clearly difficult to come up with an explanation for the continued muted consumption," said Christian Heinig, chief economist at Realkredit Danmark, the mortgage arm of A/S. "The most obvious explanation is that many still have fresh memories of the economic crisis and are aware that home equity can quickly disappear."

The haven’t always been this thrifty. For decades, spending moved in tandem with wealth accumulation. More wealth, more consumption, and vice versa. That pattern seemed to fall apart after Denmark’s housing market became a casualty of the global financial crisis, and it hasn’t held since 2014.

Danes’ obsession with thrift poses some problems. Though did inch up 0.9 per cent in the first quarter, it wasn’t enough to prevent the from shrinking on an annual basis. Danske says this year probably won’t exceed 2 percent.

First Published: Mon, June 04 2018. 11:39 IST