Commentary: Don’t expect the economy to rebound to pre-pandemic demand

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Recent trends in US consumer spending suggest that the natural forces of pent-up demand may largely be spent, says Stephen S Roach.

The concept of pent-up demand is well studied in economics. While it typically applies to the consumption of durable goods – cars, furniture, appliances, and the like – it has also been used to describe residential construction activity and business investment in plants and equipment.

FILE PHOTO: Healthcare personnel surround a patient who died inside a coronavirus disease unit at United Memorial Medical Center in Houston, Texas, U.S., December 12, 2020. REUTERS/Callaghan O'Hare/File Photo And with an even larger round of US$1,400 checks in the offing as President Joe Biden’s “American Rescue Plan” takes hold, additional impetus from consumer durables seems likely.

FILE PHOTO: Travelers wearing protective face masks to prevent the spread of the coronavirus disease reclaim their luggage at the airport in Denver, Colorado, U.S., November 24, 2020. REUTERS/Kevin Mohatt/File Photo That’s what the numbers show. Unlike the powerful rebound of consumer spending on durables, the post-lockdown rebound of services from May to December 2020 recouped just 63 per cent of what was lost during March and April.

 

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