Why the coming economic boom will be bigger than we think

The world has been turned upside down in the past 18 months, making predictions a tougher game than ever. Economists are used to using metrics like inflation, consumer spending or job markets to predict what would happen. In this new world of Covid, furlough and post-Brexit trade, traditional measures are becoming less relevant and many are now relying on micro-signals to tell us where we really are.

These are small signals that point to a wider picture or trend. Despite the bumps in the road to recovery, signs are certainly everywhere that consumer confidence is on the rise. My own micro-signal of where we are involves my daily jog, which traverses the famous Fullers Brewery in Chiswick which is now a hive of activity, with lorries now parked up queuing to be loaded with Fullers produce destined for the thousands of pubs, clubs and restaurants once again feeding and watering the nation.

The bumpy ride to recovery in 2021

The recent positive economic momentum has led Goldman Sachs to predict that the UK economy will grow by 7.8% in 2021. Back in March, the OECD had forecast UK growth of 5.1% this year. Despite new variant case numbers we have made it to the final stage of unlocking. The most encouraging aspect has to be the growth in the face of some still rather large challenges, not least many people still being forced to self isolate. This bodes well for 2022 which I now think will be the start of the delayed ‘roaring twenties’, following further bumps in the road for the rest of this year. After all, we’ve all earnt some good times.

Return to physical retail

Alongside my own micro-signal, the data on shop re-openings and peoples’ willingness to return to offices and High Streets is a fantastic indicator of consumer confidence. As restrictions are lifted, ONS data shows us that 87% of businesses are now trading again across the UK, the highest proportion since estimates began last June. Retail is the fastest current area of UK economic growth. Non-essential retailers drove much of the growth as they welcomed customers back into stores from April 12 in England and Wales.

Fashion retailers saw an astonishing boost of 69.4%. With the shift back to physical retail underway, further YouGov surveys found that being able to interact with products was the key reason for returning across every country that took part. In Britain, 42% say that it is the in-store experience that drives them to go to the physical high street. Despite the turmoil of the last year, peoples’ willingness to shop remains unabated and indeed the thirst for it has only returned. 

Entering a new phase after the exit wave

Throughout this difficult period Covid has shown itself to have an unwavering ability to confound our expectations and come back to bite us. So there shouldn’t be any complacency but a realisation we are now in a slow end game for the pandemic as a society-disrupting threat. In the UK about 90% of the adult population have had a first vaccination. Meanwhile 56% have now also had a second. While case numbers show a new wave is here,  we can look forward to ‘finally’ seeing the threat of the virus recede with booster jabs this Autumn. While Winter may be a challenging time for the NHS – we can finally look forward to a year free of the pandemic in 2022. This means we will see consumer confidence return even more strongly. 

The car industry back in the fastlane in 2022

In the last 18 months, the car industry has had to weather the uncertainty of Brexit and a global pandemic. Despite this sales have been increasing healthily. There is now the challenge of a potential global microchip shortage. What started as an inconvenience for those looking to buy a PS5, Xbox or TV has now made its way to the car industry – and a lack of chips means brands such as JLR, Renault and VW are planning temporary shutdowns at some plants. Once this issue is resolved we can expect a significant bounceback with car sales rising further into 2022 as supply issues are resolved. Forecaster LMC Automotive predicts the market will perform strongly in Europe with double-digit percentage growth with pre-pandemic levels recapture by 2023.

Supply chains will become smoother

After unprecedented disruption over the past year, global supply chains should start to work more efficiently into next year. It is not just about supply – it is also about logistics, import issues like Brexit and the shipping of goods. The disruption in the global container shipping industry has also been a factor this year – that could lead to shortages in the run-up to Christmas but should be resolved by 2022. Certainly the form filling that has been required as a result of Brexit has led to some disruption. As the situation begins to settle in the next year there should be a smoother experience and consumers should be able to receive goods faster.

So the economy has surpassed our best expectations. People have returned to retail in high numbers – one of the best indicators of rising consumer confidence. This is despite a series of really difficult challenges that remain from covid to supply chains. However these should be ironed out in 2022 meaning the best is yet to come.