Income boosts feed into higher savings

RISING redundancy payments and a gentle lift in real incomes helped to drive up the savings ratio in the third quarter to its highest rate since 1984, according to figures released yesterday.

The Central Statistical Office said that the ratio of personal savings to consumer spending jumped to 12.3 per cent in the third quarter, a rise of almost 1 point over the second three months.

This kind of increase could usually be interpreted as a reflection of recession and heavy personal debts.

However, both the CSO and the Treasury pointed yesterday to a 4 per cent rise in employers' contributions to pre-tax personal income, which indicates a boost from redundancy payments.

In addition, real personal disposable incomes advanced by 1.4 per cent during the quarter - reflecting, in part, easing inflation pressures. The figures suggest that consumers may have used some of these gains to add to their savings.

Although redundancy payments undoubtedly helped to boost the ratio, the figures imply that savings increased in line with heightened consumer caution during the quarter. Survey evidence for the period disclosed deepening fears about unemployment and mounting uncertainty over recovery prospects after sterling was driven out of the European exchange rate mechanism.

Since the third quarter, however, there are indications that consumer spending has risen. According to anecdotal evidence, car sales are up and retail sales, after faltering last month, may have risen ahead of Christmas.

Industrial and commercial companies (ICC) continued to shed stocks in the third quarter, but less rapidly than in the second three months and down steeply from the recent peak established in the second quarter of 1991.

The ICC figures also suggested that the commercial sector was broadly untroubled during the quarter. Relatively buoyant dividend payments were maintained in the third quarter while the companies' financial deficit, at pounds 1.7bn, was unchanged from the second three months but well below the 1991 quarterly average of pounds 2.7bn.