If we look at the last 14 years, the reality is that we have been in a bubble that has sent many things such as global property and equity prices to stratospheric levels. This bubble was created by extremely low interest rates and was pumped up further by other central bank actions including quantitative easing (QE). But now the bubble is deflating fast as interest rates rise due to soaring inflation, and we’re experiencing an extremely bumpy re-entry as we come back down to earth. But whilst we’re re-entering the higher interest rate environment of old, it is a manifestly different world.

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It could be said that we have a Ketchup bottle economy at the minute. Shake a ketchup bottle and nothing happens. But eventually we will get covered in red sauce as the blockage is worked free. Something similar is happening in global supply chains at present and this is impacting on all of our lives. 

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In the 1985 film Brewster’s Millions, Richard Pryor’s character is left a £300 million fortune. Provided Monty Brewster meets the challenge of blowing $30 million in 30 days he can keep the whole estate. Simply giving the money away though is forbidden and there are limits on gambling and donating to charity. The lead character embarks on a spending spree and fulfils the conditions of the will, therefore inheriting the lot.

Will we see a Brewster style spending spree in the global economy in the months ahead? Some think so. Over $5 trillion dollars of savings have been stockpiled by consumers around the world with household savings rates in many countries reaching century highs. As lockdown restrictions ease the expectation is that we will see a strong rebound in consumer spending from two sources. First, pent-up demand will be unleashed as spending patterns normalise. And second, we should see an unwinding of the forced savings squirreled away during lockdown. This boost in consumer spending, which accounts for around three-quarters of Northern Ireland GDP, will fuel an economic recovery globally, nationally and locally. 

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If someone had told us a year ago that we were going to go through the deepest recession in a century and end up with an unemployment rate of just 3.7%, this probably would have been considered absurd. Logic would dictate that a double-digit contraction in economic output would create a double-digit unemployment figure. But there has been little logical about the past year – as the Sunday Times columnist David Smith succinctly described it, it has been “the deepest recession, but also easily the weirdest”.

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It’s hard to believe that when the Chancellor stands up at the despatch box on the 3^rd March, this will be only Rishi Sunak’s second budget, and comes 51 weeks after his first. However, in that intervening period he has made another 13 fiscal announcements, with the Coronavirus Job Retention Scheme (i.e. furlough scheme) the most significant.

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January 2021 represents more than just the start of a new year. It marks the new post Brexit-era, and it brings us a step closer to a post-Covid era with the ramping up of the vaccine roll out. In some respects, this month therefore marks a turning point for Northern Ireland and our economy, and a time when we should really take stock of where we are and where we are going in the future. 

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