A transitory boost to spending?

Is spending trending?

RShoppers in King Street, Picture:DAVID FERGUSON. (30754489)
RShoppers in King Street, Picture:DAVID FERGUSON. (30754489)

Julia Warrander and Russell Waite, of Affinity Private Wealth, reply:

ONE of the positives to emerge from this pandemic is households have – on average – spent less and saved more.

In aggregate, it is estimated these ‘excess’ savings total more than US$3 trillion across the major economies of the world. This is a very big number, particularly as countries are lifting restrictions, enabling their populations to go out and spend. There is early evidence of considerable pent-up demand and the decisions taken by those lucky enough to be able to splash their cash will be of interest to psychologists, economists and policymakers alike.

How we choose to spend our money is very personal to us. That first interested cohort in our habits – psychologists – has long sought to understand what the motivations are behind our buying decisions. Their research reveals that emotions dictate our spending patterns and we commonly buy ‘things’ to portray a certain image, to address the fear of missing out, to gain or earn a certain freedom, or to simply solve a problem. By knowing how to pull on our emotional strings, marketing teams across the corporate sector use the power of advertising to persuade us what and when to buy.

Turning to economists, they fascinate over our propensity to spend or the consumption function, being the relationship between consumer spending and the various factors determining it. Moreover, it is important for them to know what we are spending our money on. Are we buying necessities, non-durable or durable goods, or are we treating ourselves to luxury items like jewellery, extravagant holidays (if only) or high-priced cars? All this helps to gauge consumer confidence, a precious ‘intangible’ and a reliable indicator of economic growth.

This brings us to policymakers. Will this unleashing of pent-up demand represent a transitory boost to spending or is it the beginning of a more structural period of expansion and rising prosperity? The answer to this question will determine the tax and spend policies of our politicians for years to come.

How we spend our money is personal to us – how they choose to spend our money should be personal to us all.

Most Read

Top Stories

More From The Jersey Evening Post

UK & International News