2021 featured a fast rebound in economic activity as vaccines allowed for progressive re-openings, so global output is almost back to pre-pandemic levels.
Despite an upturn in Delta infections (and the more recent emergence of Omicron), economic growth remains well above longer-term trends across the major economies.
Growth projections show a gradual slowdown throughout 2022, reverting to pre-Covid growth rates by 2023.
Consumers hold the key to the growth outlook. In theory they hold unprecedented cash, thanks to savings generated through the Covid-19-driven plunge in spending, direct stimulus payments and enhanced unemployment benefits.
This is clear for households in the middle- and higher-income groups, especially homeowners. These are in much better financial shape than before the pandemic, although there is great uncertainty about the speed and extent to which they will choose to run down those excess savings.
The picture for lower income households is much less flattering: they received temporary respite in the form of fiscal stimulus (unemployment cheques and the like), but their stock of savings is much lower. Therefore, they are much more vulnerable to future shocks, including the continuous loss of purchasing power if their wages do not keep up with inflation.
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