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 or 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 ...
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for updates on the UK and World Economy.
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