The effects of spending savings

Posted by: Paul Donovan

13 Oct 2020

Daily update

  • Consumers are in focus in the data today. Chinese export numbers were in the upper part of the forecast range for September. People emerged from lockdown eager to spend their savings on stuff (rather than services). China is, for now, the largest manufacturer in the world, and so Chinese exports have logically grown. It is far too soon for trade localization to have affected this data.
  • The UK's September BRC retail sales were stronger than the most optimistic forecast, as consumer continued to spend. Even with some normalization in the economy, the move to online spending remains high. Now my mother has cracked the code of online delivery slots, she is less likely to return to shopping in person.
  • UK unemployment for September is due. Globally, unemployment is the next big focus. There was a faster recovery of labor markets as firms with a future sought to hire back workers as quickly as possible. As that momentum fades, we are left with structural unemployment.
  • German final September consumer price inflation is uninteresting. US CPI is a little more exciting. On some measures (e.g. median CPI), inflation is over 2.5%. CPI probably understates real world inflation, and most people will be experiencing a higher cost of living than reported.

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