As pandemic restrictions come down, growth projections are looking up. Thanks to its high vaccination rates, the UK’s outlook has been especially favourable, with growth now estimated by the OECD at 7.2 per cent for 2021. These numbers will continue to be tweaked, but one thing is certain: the recovery, when it comes, will be driven by consumer spending.
It has long been so: ours is an economy fuelled by private domestic consumption, which represents about 65 per cent of the UK economy, and a greater portion still of the US one. As in all affluent societies, the greater part of this spending no longer serves to procure the basics of life, such as food and shelter and physical comfort. Instead, it is directed at a range of social functions, from gaining the esteem and consideration of others to expressing one’s own identity. Even the organic watercress bought at the farmers’ market serves more as signal than salad.
That is why, when the social aspect of our lives was suddenly relegated to square images on our computer screens, private consumption fell as sharply as it did. It is also why the category of goods that will have the greatest surge of demand this year, after the greatest plunge in the past 18 months, is apparel and beauty products.