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Saturday 3rd April 2021
Hi Friend,
Get Ready ... For the Post Pandemic Boom ...
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| "Happy Easter" Friend ...
The IMF now sees a brighter outlook for the world economy. The Bank of England is feeling more optimistic about the UK. The Office For Budget Responsibility forecasts real growth of 11% over the next two years.
In nominal terms the UK could grow by over 20% over the next three years, underpinning growth for jobs and business in the medium term.
Thanks to the success of the vaccination program, the pressures of the pandemic are easing, providing a stimulus to growth. Thanks to the approval of President Biden’s spending plan, the American and world economy will benefit from his $1.9 trillion fiscal boost.
In the UK, The Governor of the Bank of England is feeling more optimistic about the prospects for the year. Vaccination continues at pace. The slow down in the economy in the first quarter is better than expected. Restaurant bookings are increasing. Domestic holiday reservations are rising. Consumer confidence is on the rise. Business confidence in manufacturing and construction is particularly high.
Asked what sort of recovery the UK could expect, Andrew Bailey said "I am now more positive but with a large dose of caution". "We now see upside risks to our January forecast", with some chance the peak in unemployment, may be lower than expected.
Boris Johnson’s timetable for recovery, suggests the hospitality sector, could be in full recovery mode from the end of June. According to Andy Haldane Chief Economist, at the Bank of England. The UK economy is like "a coiled spring", set to release lots of financial energy.
“Consumer confidence will surge back, the economy will be firing on all cylinders. Success with the vaccination and the easing of lock down, will assist the process,” he said.
British households have amassed an astonishing £180 billion of cash apparently. They will be ready to return to the restaurants and book a much needed holiday. They may even take a trip to the cinema.
Unemployment actually fell in February to 5%, a modest improvement in the jobs market. Latest data from HMRC confirms that 4.7 million were on furlough at the end of February. Over one million were in the accommodation and food sector.
The number of workers furloughed is expected to drop rapidly in the second quarter. In September last year, the total number had dropped to 2.5 million as growth returned. A big bounce back is expected in the leisure sector as pubs, restaurants and hotels reopen for business.
According to the latest IHS Markit/CIPS data, business activity across the UK increased in March. The rate of expansion was the fastest for months, The expansion was fueled by a rise in new orders, attributed to a bounce back ahead of easing lock down measures. Stronger consumer confidence and a surge in demand for residential property services also featured.
Business expectations for growth, surged to the highest since comparable data were first available in 2012. Employment rose for the first time since the pandemic struck, as firms expanded capacity to meet demand ... |
| Forecasts for growth are increasing ...
In the US forecasts for growth are increasing. The Bank of America is forecasting growth of 6.5%. The BoA has become more convinced, consumers will get out and spend, as the $1400 dollar stimulus cheques drop through the letterbox.
Biden's $1.9 trillion spending plan has passed through Congress. Next up the $2 trillion dollar plus infrastructure plan. The President is building bridges across America. Let's hope he will start to build the bridges back to China some time soon.
The US March jobs figures reported an increase of 916,000 jobs. Over 30% were in the hospitality and leisure sector. Economists think the March jobs gains are just the beginning. US households had accumulated $2.4 trillion dollars of savings in February, up by $1 trillion from a year earlier and they are ready to spend.
According to the New York Times, about 35 percent of Americans plan to spend more on travel over the next
12 months, about 28 percent plan to spend more than usual at restaurants. And over
all, close to 70 percent of adults plan to spend more than usual in at
least one category.
“They have the money in the bank, they’re ready to spend it. What was holding them back was not having a comfort about being able to go out,” said Jay Bryson, chief economist for Wells Fargo. “We’re getting
into a critical mass of people feeling comfortable and beginning to go out again.”
Not all will be spending. More than half the survey respondents who expected to receive "checks" said they planned to save most of the money or pay down debt. One-third said they would use it for immediate needs like food or rent. Only 10 percent said they planned to spend most of the money on discretionary items.
A similar pattern of save and spend is expected in the UK. Households have accumulated savings of £180 billion, over £20 billion of which has been used to pay down credit card and other debt. Most savings will be held on deposit are placed into pensions. Some appears to be finding the way into bitcoin.
In the UK, we expect household spending to increase by 8% this year and 7.5% next. Holidays, hotels and restaurants will be the major beneficiaries. Of yes and wardrobes will have to be refreshed. Expect a big bounce back in clothing and footwear ... in the post pandemic mini boom ...
That's all for this week ... stay safe ... have a Great Easter break ... we will be back with more next week ...
John
https://www.nytimes.com/2021/04/02/business/postpandemic-spending.html @bencasselman |
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