Wednesday, 20 January, 2021
(Bloomberg Economics) —
- After being starved of opportunities to go out, social spending could pick up pace quickly as restrictions are eased if the vaccine reduces concerns about contracting the virus. The boost will be particularly large if the spending habits picked up during the pandemic, notably the increase in spending on household goods, are maintained.
- Some purchases will have been delayed and are likely to take place once the economy reopens. For example, car sales are down on the year.
- Rock bottom interest rates mean the rate of return on deposits is extremely low, thereby providing little incentive to hold cash in the bank.
- Fear that the pandemic could return in a new form, may mean a slower decline in the saving rate to as households seek to maintain a larger buffer than we currently forecast.
- Unemployment is also likely to rise this year as the furloughscheme ends. Joblessness (or the threat of it) tends to reinforce the appetite of households to maintain a precautionary buffer.
- While saving has risen at an aggregate level, it’s likely to be unevenly distributed toward higher earnings. Those individuals have a lower marginal propensity to consume.
- Talk of eventual tax rises to ‘pay for’ the government support during the pandemic is likely to mean households are more reticent to open the spending taps fully in coming quarters.
This message may contain confidential or privileged information. If you are not
the intended recipient, please advise us immediately and delete this message.
The unauthorised use, disclosure, distribution and/or copying of this e-mail or
any information it contains is prohibited.
This information is not, and should not be construed as, a recommendation,
solicitation or offer to buy or sell any securities or related financial
products. This information does not constitute investment advice, does not
constitute a personal recommendation and has been prepared without regard to
the individual financial circumstances, needs or objectives of persons who