With the focus squarely on the “re-opening” of the economy, expectations remain high among pundits that activity will bounce back quickly. We are not so sure, especially when it comes to how consumers will begin spending again. Remember, this group is the main driver of economic growth in the country, so without their participation there is no sustainable recovery.
To be sure, there will be a natural bounce in certain items following the loosening of the “shelter-in-place” orders as many businesses go from zero activity to some activity. But what happens after? In previous reports we have advised investors to watch what the savings rate does amidst the current mayhem and, lo and behold, in March it ticked up to a 40-year high of 13 per cent.
Consumer confidence is one factor depressing consumption, but so too is the fact that a vast majority of businesses were shuttered during the