3 Reasons to Be Positive About the Economy

3 Reasons to Be Positive About the Economy

In the current climate it’s easy to get bogged down in a lot of the negativity and catastrophic predictions of some across the media and finance sectors.

Whether they’re right or wrong, what we do know is that gloom grabs headlines and positivity is often dismissed as irresponsible and too hopeful.

This often belies the true story and manipulates facts and figures in order to catastrophise things and grab attention, but the truth is that, whilst there are plenty of reasons to be cautious and plan for troubles ahead, there are equally plenty of reasons to be positive, and so here are three reasons to be more upbeat.

The property market

Ever since estate agents re-opened their doors in May they have consistently been reporting huge demand that doesn’t appear to be levelling off, even weeks later.

Logic would dictate that if there was a small backlog of pent up demand it would be tailing off or have stopped by now, but this doesn’t appear to be the case.

NAEA Propertymark’s May Housing Report revealed that demand from house buyers has actually increased by 12% year-on-year despite the pandemic, whilst noting that the political uncertainty of the previous year may have actually had a worse effect on demand.

As it stands, with prices holding stable, and demand soaring, we could find that prices, yields and values have all increased before the end of the year.

Despite dire warnings of collapse, the market has been remarkably resilient, and in some senses actually flourished.

The V shape

Talking about the potential shape of an economic recovery has ben debated for some months and involves two camps; those who believe that the recovery will be a ‘swoosh’ shape and those who believe it will be V shaped.

A swoosh would see a much longer, slower and more painful recovery lasting years, with the economy struggling to recapture the momentum and activity lost during lockdown measures.

Those who believe in a V shape think that it will be much quicker and take a lot less time, as demand hasn’t been lost but simply delayed.

As described in the Financial Times, a number of influential voices are now starting to back the V shape theory as the most likely scenario, stating that ‘ For months, much of the global population has been locked-down, making normal economic activity logistically impossible. People haven’t avoided buying stuff because they don’t want it. Nor, in most cases, because they can’t afford it.’

The money is there

For those insisting that disposable incomes have disappeared and that consumers simply don’t have the money to spend their way out of recession, there’s a serious flaw to their argument. Simply put, UK consumers repaid a record amount of debt during lockdown, essentially showing that their income hasn’t disappeared, they simply haven’t been able to spend it.

With that level of income now free for consumers to spend again, the chances are that they’re going to go and out and spend it in the economy following the shut down. As noted by Merryn Somerset Webb, Editor-in-Chief of MoneyWeek ‘US car sales were 70 per cent of their pre-Covid levels by mid-May, having collapsed in March. French consumer spending in May was only 7 per cent below normal. In the UK, this week’s long-awaited lockdown loosening saw restaurant reservations and hotel bookings soar. In Germany, most June data suggested that ‘economic and social activity has started to pick up significantly’, according to ING.’

It appears that optimism is most certainly back!

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