Ross Clark Ross Clark

Will the economy really rebound after lockdown?

Bank of England chief economist Andy Haldane last week described the UK economy as a ‘coiled spring’ waiting to rebound just as soon as lockdown restrictions are eased. But is it a spring like the one on which Zebedee from the Magic Roundabout used to bounce around, or is it like a Slinky – the toy you place at the top of the stairs and watch, fixated, as it furls and unfurls itself right down to the bottom?

Haldane, it is fair to say, sees it much like the former. He describes the economy as full of ‘pent-up financial energy’. While the bank sees lockdown number three causing output to fall by 4.2 per cent in the first quarter of 2021, thereafter it sees a steady recovery. Part of the evidence it cites is a survey it published last August which showed that many households reduced their spending during the first lockdown even though their personal income had not fallen. It found that in April and May last year 28 per cent of households said their income had decreased, 8 per cent said it had increased and 65 per cent said it was unchanged. On spending, however, 57 per cent of households said it had decreased, 19 per cent said it had increased and 24 per cent said it had stayed the same.

If it was your habit to go to the theatre and eat out once a week before the crisis, are you really going to start doing those things three times a week to catch up on what you have missed?

That shows a distinct disparity between income and expenditure – not entirely surprising given that the shops, restaurants and theatres were closed. It suggests that many people may now be sitting on a pile of savings that they did not have this time last year.

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