Following more than a year of pandemic-related restrictions, economies have begun to open up across the globe. Monitoring consumer spending in the months ahead could show just how quickly the U.S. and other developed economies can bounce back.
People did not stop spending during the pandemic. In many cases, they simply shifted spending from services to goods, as Blu Putnam and Erik Norland point out in the latest episode of The Economists, above. Now, with COVID vaccinations and stimulus payments on the upswing, that trend could be reversing.
“There is pent-up demand for what one could not buy during the pandemic of 2020,” says Norland. “People want to get out of the house and travel. Airlines have already seen a sharp uptick in flying, restaurants – hard hit in 2020 – will have a boom year in 2021 as the economy reopens.
What this means is that people are shifting spending away from the goods they bought during the pandemic shutdown and focusing more on the services they were denied. This is a sign of economic optimism.”
Optimism in the Air
While there are reasons for optimism, a long-term economic boom is still very much a question. Demographics in some of the world’s largest economies are trending older, which could limit some of the growth opportunities like those experienced a century ago following the last global pandemic.
“It’s not going to be quite like the roaring 20s of the last century following the influenza of 1919,” says Putnam. “The U.S. population now is much older this time around as it is in Europe, China, and Japan. Baby Boomers are retiring and they’re probably not going to party as much as they once did.
Still, what a difference a year makes. Optimism is in the air and retail spending is a good barometer.”
Watch Putnam and Norland’s full discussion of the retail recovery above.
The Economists is a video series covering the industries and events shaping global economics with a special focus on post-pandemic economic realities. Episodes are released monthly.