Part of a  (BCL) has analysed the impact of the covid-19 pandemic on work status, household income, consumption, savings and financial wealth in Luxembourg.

20% of Luxembourg households saw changes to their income due to the pandemic, while approximately 50% saw “significant changes in their consumption and savings patterns” and 25% experienced changes in the value of their financial assets.

Although poorer households were more likely to see a decline in their income due to covid, noted the report, the average change for households at the bottom of the income distribution amounted to around -1% of gross income. Households with low income were also more likely to see a decrease in the value of their financial assets, said the BCL.

Here are a few takeaways from the report.

Income declines more common amongst lower-income households

The survey results showed that gains and declines in income varied across the Luxembourg population. Households with the lowest income were more likely to report income declines: 16% of households in the Q1 quintile--the bottom net income quintile--reported decreases in their income compared to compared to 10% and 12% in the top two net income quintiles.

These top two net income quintiles also saw the largest amount of households report a gain in income: 8%.

The average decline in income was 9% for households who reported a decrease. For those who saw increases in their income, the average gain was 22%.

82% of all households did not report any change, noted the BCL’s report.

45% changed consumption habits

A Statec study mentioned in the BCL report found that spending on restaurants, cafes and canteens decreased by 43% in 2020, and cultural and sports services saw a 22% drop in expenditure. On the other hand, spending on food and beverages jumped by 23%, while purchases of computers increased by 36%.

In Luxembourg, more households in the top net income quintile (33%) reported a decrease in consumption. Only 13% said their consumption increased.

For households in the lowest net income quintile, 28% said their consumption declined and 24% said their consumption increased.

Overall, 27% of Luxembourg households saw a decline in consumption and 18% reported an increase. 55% said their consumption patterns remained stable.

The largest drop in consumption expenditure for holidays was seen in households in Q4, the second-highest net income quintile: 38% of these households reported a drop in expenses for holiday trips or vacations, said the BCL. This figure was 24% for the highest and lowest net income quintiles.

Financial wealth up by 22% for highest income quintile

Households in the top income quintile were the most likely to report an increase in their financial assets, such as bank deposits, stocks and mutual funds. 22% said they saw a gain in their financial wealth, compared to 11% in the lowest net income quintile.

10% of households in the topmost income quintile and 13% of households in the lowest income quintile reported a decline in their financial assets.

The BCL report found that overall, 11% of households in Luxembourg saw a reduction in the value of their financial assets, while 14% saw an increase in their assets. 75% of households saw their financial wealth remain stable.

Looking at the figures from the perspective of wealth quintiles, 16% of the lowest wealth quintile reported a decline in their financial wealth, compared to 8% of the highest wealth quintile. According to the BCL, this suggests that poorer households were more likely to see decreases in their financial assets and less likely to see gains when compared to richer households.

Big increase in savings for rich, big decline for poor

33% of households in Luxembourg’s lowest wealth quintile reported seeing their savings drop, while only 6% of household in the top wealth quintile saw their savings decrease.

Households in the highest wealth quintile were much more likely to see an increase in their savings when compared to households in the bottommost wealth quintile. 41% of households in the top wealth quintile reported an increase in their savings; only 22% of households in the lowest wealth quintile saw the same.

Overall, 48% of households said their savings remained stable. 19% saw a decline while 33% saw an increase.

The changes in savings is likely due to a decline in consumption spending requiring social contact, said the BCL’s report. As spending on holidays dropped quite a bit amongst the richest quintiles, these households saved more.

Find the Banque centrale du Luxembourg’s full report .