Economics: Bank of England is upbeat … generally
10 May 2021The Bank of England has issued a new Monetary Policy report LINK. This builds on the narrative established in previous editions, but is slightly more upbeat...
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The saving pile
Some households have built up a large body of savings over 2021 (previously estimated at >£125bn. Willingness to spend this seems to be growing, but it is not clear how fast this will happen or how much will actually be unlocked.
The Bank estimates that around 10% will be spent over the next 3 years, versus an estimated 5% in February.
Key uncertainties, demand side:
Future path of Covid and the consumer response to it
Speed of running down accumulated savings – will “spenders” be offset by new “savers”?
Uncertainties, supply side:
Risk of return to previous low productivity growth
Impact of new capital allowances on investment
Frictions around reallocation of labour from low growth to higher growth sectors
Impact of EU Exit