Will spending in restaurants, pubs and shops be enough?

A mini-boom in non-essential spending driven by high-income households is plausible but unlikely to compensate for wider economic losses that have been sustained. The vaccination rollout may promote an air of confidence that stimulates economic activity, although complacency could trigger a third wave.

This is the view of London Business School’s Paolo Surico, whose research, The Distributional Impact of the Pandemic, indicates that a new mini-boom in non-essential spending, and is driven by high-income households, seems a highly plausible scenario following the easing of lockdown on April 12th.

However, says Surico, who is professor of Economics at LBS, it is unlikely this activity will compensate for lost economic activities during the lockdown as there has been so far little sign of penta demand.

“On the other hand, progress on the vaccination roll-out may make consumers complacent about the likelihood of getting the virus. Economic activities may be boosted in the short-run, but eventually may slow down the recovery should it trigger a new wave of contagion,” he says.