Pent up demand after corona lockdown will be very limited

Will consumer spending exceed its pre-corona level to make up for the lockdown? I doubt it.

Lockdowns force households to save. However, consumers won’t be able to spend money at crowded spaces1 as easily as they did before the virus.

Furthermore, a lot of consumption is lost forever and cannot be replaced. Just think about things like haircuts, restaurant visits, massages, and housecleaning.

I still think a swoosh-shaped recovery is possible2. Yet I don’t expect the economy will bounce back above its pre-corona level thanks to pent up demand.

  1. E.g. bars, stadiums, buses and airplanes.
  2. Provided governments bail out companies, don’t do austerity and central banks support the recovery with low interest rates and/or helicopter money.

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