Much of the nature and extent of the global economic recovery will ride on whether the much-anticipated pent-up demand is released into the economy through consumer spending and also what the nature of that spending will be.
UBS CIO Paul Donovan has a colourful way of describing the differences in consumer spending in the US versus Europe. Regarding the US, he says: “As restrictions ease, spending on restaurants and other personal services are increasing. People are switching spending to having fun .” Although the more vibrant picture Donovan paints of the US could ultimately prove the inflation-mongers right, former Morgan Stanley chief economist Stephen Roach also doesn’t expect a strong rebound in consumer spending to the extent that it revives 1970s-style inflation.
In South Africa, initial signs of an economy-wide spending increase are muted, even though some statistics are moving in the right direction, with consumer confidence improving slightly in February. Spending on durables in 2020 is still 8.5% lower than the previous year.
McKinsey Global Institute also expects the pandemic to leave lasting marks, but its research finds that spending on things like live entertainment will revert to pre-pandemic patterns. The graphic below illustrates its findings, which include that e-grocery shopping, virtual healthcare visits, and home nesting are likely to stick. In contrast, remote learning, declining leisure air travel, and decreasing live entertainment are, it says, “likely to revert closer to pre-pandemic patterns”.
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