Reopening could be a damp squib

With all domestic restrictions gone and the booster rollout further severing the link between cases and deaths, the conditions for a reopening bounce are in place. Moreover, consumers have ample room to splash the cash. The household savings rate remained far higher than in most other advanced economies at 9% in Q4. However, since the initial Omicron wave subsided timely data suggest that consumers are keeping their purse strings tight. While admittedly not the best guide to actual spending, Google data on the number of people at retail and recreation facilities show mobility not much higher than this time last year. And online restaurant views were still a huge 64% down on 2019 levels in the first week of April, hinting that face-to-face services spending hasn’t rebounded much yet. Add to those disappointing early signs the fact that the government hasn’t ruled out responding to future waves with yet more restrictions and the risks to our forecast for a cumulative 4% q/q rise in private consumption across Q2 and Q3 are firmly to the downside.