BlackRock Investment Institute

Macro insights

Pent-up demand to drive the restart

We see pent-up demand fuelling the U.S. economic restart. In particular, contact-intense services sectors are likely to rebound sharply once restrictions begin to ease, supported by a large accumulated amount of personal savings. See the chart below. We estimate the accumulated stock of household savings in the U.S. to be about $1.5 trillion larger than the savings generated in the year before the pandemic – equal to about 7% of 2019 GDP.

Saving it up
U.S. income vs. consumption, 2017-2020

U.S. income and consumption

Sources: BlackRock Investment Institute, Bureau of Economic Analysis, with data from Haver, January 2021. Notes: The chart shows U.S. disposable incomes and personal consumption expenditures rebased to 100 as of January 2020. We assume difference between the two as the excess savings buffer households have built up as a consequence of limitations on how people typically spend their income. The latest data do not include the stimulus payments distributed at the start of the year, which should add further to the savings buffer.

Much of this likely represents “forced” saving, with many households unable to spend the same proportion of their income as they have in the past. These “forced” savings should unwind as restrictions ease. The additional fiscal support announced last week should provide a further boost, in our view.

We view China as an example of how the pent-up demand could be released. Services output in China has almost returned to its pre-pandemic trend just three quarters after the virus has been brought under control.

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