Post-Covid consumer mood could be more alienation than celebration

For some there will be savings to spend, for others ‘persistent scarring effects’

Cash. Remember cash? Photograph: iStock

Fears, walks, strange dreams: this pandemic has led to an excess of many things. For the financially and professionally lucky, it has created a glut of “involuntary” savings now poised to be spent once restrictions fall away. But in which directions will the money spray?

In an economic letter published by the Central Bank of Ireland, Reamonn Lydon and Tara McIndoe-Calder outline a scenario where €5 billion pours out from these unexpectedly swollen bank accounts, as consumers part with "a relatively high share" of their savings and make the post-Covid "bounce" that bit bouncier.

Holidays, restaurants, tickets to gigs, tickets to matches, even tickets to Vogon poetry nights could all mop up excess custom as pent-up demand uncoils.

Naturally, some "revenge spending" will flow abroad. I hear the Wallis and Futuna islands are lovely at this time of year. But Ireland, as the Central Bank letter noted, should also enjoy the "potential offsetting effects from more inward tourism".


Eventually, businesses in the non-virtual recreation sector won’t have to do much more than stick a hand sanitiser in a prominent position by the wide open door, as all the long-forgotten life concepts currently adorning the pastel hoarding for Dublin’s promised Clery’s Quarter – “meet”, “mingle”, “entertain” – are taken out of the deep freeze and unthawed.

Economists (and marketers) have been here before – sort of. The scale of these “excess pandemic savings” and the boost they could give consumer spending has been likened to the influx of cash from special savings incentive accounts (SSIAs) during the boom phase of the Noughties.

Ah, SSIAs. It has been years since I had to type out those words in full, but some abbreviations never leave you. With my income close to zero when the SSIA scheme was open, I was still running down the pier as the “free money” boat departed, only to then be condemned to report on the progress of this excessively populist government wheeze for the next five years as the possible destination of the savings was endlessly surveyed and debated.

Just what will people with money do with their money? After a while, when you have none, it’s hard to truly engage.

As it turned out, home improvements were one of the largest outlets for voluntary SSIA nest-eggs back in 2006-2007 and they may become so this time, too, if only because there is something of a correlation between homeowners and people with leftover cash at the end of the month.

Temporal restraints

Personally, I can think of better uses for money than zhuzhing up a home you’re finally no longer stuck in by Government decree. Still, some spending – eating out, getting your hair done – is, for all but the most dedicated, subject to what are fancily referred to as “temporal restraints”. It is unlikely to be fully caught up on. So inadvertent lockdown savers are sitting on “additional income” that, the theory goes, they will want to unburden themselves of as soon as the opportunity arises.

But if the whole idea of saving seems bizarre to you in the middle of a massive economic shock, then you’re not alone. For vast swathes of people, the pandemic has been a time of stressful applications for emergency supports, not accruing earnings untouched by Covid-19.

Nor will this financial suffering – which the Central Bank said has taken a disproportionate toll on younger workers, women and those without third-level education – simply be erased. Miserably, far from every business in the “restricted sectors” will survive long enough to benefit from the post-Covid savings stimulus.

Last week the bank said unemployment would remain high next year, and that 100,000 jobs would be permanently lost as a result of the pandemic. And if Government supports are tapered off or withdrawn too fast, insolvency triggers could abound. “Persistent scarring effects” is one phrase that crops up.

In between the two extremes – people who are now effectively more comfortable than they were before the pandemic; and people whose incomes may never recover – there will be many others skipping the post-vaccination splurges and confining themselves to excess fears, walks and strange dreams.

This is the group that found their lower commuting expenses swiftly obliterated by higher working-from-home energy bills. They might have paid down a little debt in 2020, but that’s about it. If their incomes have stagnated or have even slipped lower than they were before the financial crash, the prospect of participating in some imminent Swinging Twenties blowout will seem totally alien and alienating – as will the inevitable, understandable rise in prices.

Indeed, for would-be homeowners who continue to have the strongest motivations of all to save, inflation could become an out-and-out curse. It is not enough to be able to save for a deposit – you have to be able to save faster than your competition.

‘Fr Dougal’ view

None of this points to a celebratory mood in years to come, but instead an insanely uneven, unequal economy in which those who can afford to save adopt a more “precautionary” approach and those who can’t save do their best to scrape by.

It's a feeling captured in the latest consumer sentiment index from KBC Bank Ireland, in which consumers' caution about their own financial circumstances exceeds their more positive outlook for the economy. KBC chief economist Austin Hughes explains this as a "Fr Dougal" view of Irish economic recoveries on the part of Irish people, "in that for some any gains are really small, while for others they are far away".

In the good-times version of the near-future, there won’t be so much a reopening of the economy as the uncorking of a new one. But not everybody will be invited to the party, or even get to work it.