Chart of the Day: Take a look at Singapore’s extreme consumption levels

Saving is not ‘in’.

As the chart illustrates, saving rates for ASEAN economies show the other side of the rising-consumption coin. These have traditionally been far above those in the US and other Western economies, especially in Singapore. Over the last four years, the largest ASEAN economies have shown a clear trend of putting aside less as they spend more.

In a report by DBS, the ASEAN economies face some dangers in the movement towards higher debt and higher consumption economies.

DBS says that a number of factors make high consumer lending potentially destabilising for an economy.

High leverage itself is dangerous in a system: when wage growth slows and households start to struggle with repayments, the businesses owed money struggle with wage bills. This is because they base decisions on future income streams being ever-larger.

In turn, the employees of those businesses fall into difficulty. Compared to an economy where people spend out of present earnings only, a downturn in a high-debt economy is amplified.

Here’s more from DBS:

Singapore’s government has recognised the potential danger. Singapore’s property market in the past has been characterised by spectacular rises and deep corrections following them, two of the largest occurring in 1997 and 2008.

Singapore’s government appears to have grasped that while financing consumption of goods and services is useful for rebalancing growth, financing expenditure on the property market can cause as much harm as good to an economy.

It depends on whether that market is experiencing a speculative bubble where demand feeds on itself, or whether the market can raise supply in response to high demand.