NEW HAVEN, Conn. —As the second vaccine shot went into my arm, I could almost taste the instant gratification of deferred desires. Having done without for nearly a year, it was time to indulge.
The idea rests on a basic premise of dynamic demand models known as the “stock-adjustment” effect: an unexpected development that prompts a deferral of spending on long-lasting items with a finite lifetime does not mitigate obsolescence and the associated need for replacement. It follows that once the interruption ends, a surge of postponed, or pent-up, replacement demand can spark economic recovery.
This time is different Recent trends in U.S. consumer spending suggest that the natural forces of pent-up demand may largely be spent. Over the final eight months of 2020, the post-lockdown rebound of durables consumption was fully 39% greater than what was lost during the lockdown in March and April. As a result, durables consumption rose to 8.25% of gross domestic product in the second half of 2020—the highest share since early 2007 and well in excess of the 7.
Since the early 1990s, recoveries in personal consumption have been relatively muted. But in the seven cyclical expansions from the mid-1950s through the early 1980s, the release of pent-up demand boosted consumer durables’ share of GDP by 0.6 percentage points, on average, in the four quarters following business-cycle troughs.
Long-term scarring So do recent data showing signs of scarring in the services sector—especially in activities that require face-to-face contact such as travel, leisure, and entertainment. Vaccines or not, face-to-face interactions are at odds with a now deeply-engrained awareness of personal health risks that will most likely influence consumer behavior for years to come.
Again, the reason is hardly surprising. Fully 83% of that shortfall has been concentrated in face-to-face private services such as transportation, leisure and hospitality, accommodations, food services, retail trade, motion pictures and sound recording, and nonpublic education. New research points to more of the same: post-COVID-19 headwinds in services are likely to be an enduring feature of the U.S. labor market.
The pent up demand is HUGE. Savings rate high. About to get higher. $1,400
It has nothing to do with COVID. It has to do with an economy that was forced closed by government overreach. Once that is over, people will start acting normal again.
I think there is pent up demand for travel and various forms of entertainment, including concerts, theme parks and maybe even going out to restaurants.
Disagreed. People will rush to travel and spend money like crazy when everybody is vaccinated.
BenjamKingdon Opposite of what we talked about.
supercharging the economy during a lock-down is an oxymoron
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