The global economy suffered its worst performance since the Great Depression last year. A slump in household demand was a key element of the contraction as lockdown restrictions were implemented. However, there are increasing hopes that the reopening of economies and unleashing of pent-up demand will generate a powerful consumer-led recovery.

Steady personal incomes and cash hoarding
Despite the dramatic fall in output last year, personal incomes have remained relatively steady during the Covid-19 pandemic. Household balance sheets were stabilised by government job retention schemes, extended unemployment benefits and stimulus cheques. Consumers in the world economy are estimated to have accumulated excess savings of nearly $5.4 trillion according to credit rating agency Moody’s data.

There are three major reasons why the cash hoard has developed. Firstly, forced savings: the closing of nonessential retail, as well as travel…

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