TOKYO / LONDON – Coronavirus vaccine deployments have started around the world, raising hopes that the global economy can begin to reopen.
Strict traffic restrictions and social distancing measures have discouraged consumption, and savings have increased dramatically in major countries.
The correlation between movement restrictions and consumption suggests that consumption will resume once restrictions are relaxed – a rapid vaccination program will have a significant impact on economic recovery.
Nikkei studied the correlation between the severity index calculated by the University of Oxford – an index that measures the severity of mobility restrictions – and personal consumption in 37 member countries of the Organization for Economic Co-operation and Development. (OECD) and found that the more mobility restrictions are relaxed, the more consumption rebounds.
Between July and September 2020, personal consumption increased by 11% quarterly on average in OECD member countries when their economies reopened. The UK registered a 19% increase. Global consumption was sluggish between October and December 2020 due to another wave of infections, but vaccines are expected to ease restrictions from January to March 2021.
The rebound in consumption will be supported by a significant increase in household savings. Savings rates – the percentage of money left over for saving from disposable income – in Japan, the United States, Europe and other major economies, have risen sharply to historic levels due to mobility restrictions and stimulus measures. The personal savings rate in the United States climbed to about 30% between April and June 2020, more than double the average recorded between 2007 and 2019. The distribution policy of $ 1,400 per person is expected to have further increased l household savings.
In Europe, too, expectations are high for the relaxation of movement restrictions, which should release a huge amount of coiled energy as people will be able to travel again. Andrew Haldane, chief economist at the Bank of England, wrote in the Daily Mail: “A watershed is about to be turned for the economy as well, with huge amounts of pent-up financial energy awaiting. to be released, like a coil spring. “
According to travel data company Adara, the number of airline ticket bookings for tourist trips more than three months in advance is increasing in Europe.
In countries that have been successful in deterring infections even before vaccination programs have started, consumption has started to pick up. According to Singaporean restaurant reservation site Chope, the number of reservations in January increased 37% year-over-year.
“Leisure travel restrictions that remain in place continue to boost consumers […] and catering is one that can not only evoke travel, but continues to be a lifeline in staying connected in these difficult times, ”said Jean Wee, Managing Director of Chope. An upscale sushi restaurant in the city-state has said it reserved for reservations through mid-September.
In many countries, the pace of vaccination will have a significant impact on the economy. In Israel, where immunization rolls out the fastest in the world, 30% of the population has already received two doses. If the current pace continues, over 70% of the population will be vaccinated and hopefully immune by spring 2021. The closer a country gets to so-called herd immunity, the easier it will be to lift interlocks.
In the United States, President Joe Biden aims to have 100 million doses of vaccine administered by the end of his first 100 days in office; currently the pace is exceeding this target – the number of shots is currently around 1.7 million per day.
In contrast, in Japan, where the deployment of vaccines has been slow, and in the European Union, which lacks vaccines, reopening economies will not be easy.
Given rising demand in the United States, economists predict that consumer spending will rise more than 10% year-on-year, from the April to June quarter. Inflation fears are also rising, with analysts anticipating a spending spree. Central banks around the world will face tough choices if markets bet on tighter monetary policies before the global economy recovers.
Additional reporting by Tatsuya Goto in New York and Takashi Nakano in Singapore
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