Reasons to be cheerfull, 1 , 2, 3....28 Jan 2021 12:29
SAVINGS STOCKPILE AND PENT-UP DEMAND: THE COMING CONSUMER
SPENDING SPREE (1405 EST/1905 GMT)
The pandemic, and the resulting economic shock due to
widespread lockdowns to contain it, has made consumers
understandably cautious. But pent-up demand, combined with a
substantial increase in household savings, suggests consumers
could roar back to life in the coming year.
Oxford Economics published a research note on what global
markets can expect from the consumer in 2021 as vaccine
deployment and economic reopenings hopefully coincide with
people reopening their wallets.
"Sharply rising household savings, booming house prices,
strong financial markets, and unprecedented fiscal support have
all contributed to unusually strong household balance sheets at
the start of 2021," writes Tamara Basic Vasiljev, senior
economist at OE. "Consumers are still cautious but can now
afford a spending spree."
Lost income was offset by fiscal support in most advanced
economies, according to Vasiljev, who adds that easy monetary
policy, rising residential real estate prices and booming
financial markets have strengthened household balance sheets,
according to the note.
But this phenomenon failed to benefit all households
equally. "A large share of the savings boost may have been
accrued by wealthy households that have suffered less economic
hardship during the pandemic, while many of the relative losers
may have run down their savings," Vasiljev says.
In the United States, where the consumer contributes about
70% of economic growth, increased savings deposits and a sharp
decline in revolving credit outstanding suggests that when
Americans feel confident enough to embark on a post-COVID
spending spree, they'll be able to afford it:
(Stephen Culp)