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Research - MAY 7, 2021

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Is this a Goldilocks recovery? Consumers will decide

by Andrea Zander

Despite COVID-19 cases rising globally, Oxford Economics noted the upside risks to the firm’s already relatively optimistic baseline are material. The main risk stems from the estimated $4.7 trillion pile of excess savings accumulated by consumers in advanced economies that could be tapped to unleash a wave of post-pandemic spending.

The firm estimates advanced economy consumers will spend on average 5 percent of these savings. But if they splash out even a little more, the 2022 growth outlook will rise considerably.

For Europe, this would be a welcome boost to the recovery, but for the United States, it poses a clear threat of overheating the economy.

Whether consumers view their excess savings as wealth or as income is key to determining the size of the boost to the economy. Depending on how they treat the windfall, its model predicts the global economy could receive a GDP boost ranging from 0.4 percent to 1.5 percent by mid-2022.

For emerging markets

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