A personal view from Ian Stewart, Deloitte’s Chief Economist in the UK. To subscribe and/or view previous editions just google “Deloitte Monday Briefing”.
This summer holiday season will be like no other. Nonetheless, as we have done for the last 11 years, the end of July marks the launch of our summer reading list. The six articles aim to offer a stimulating read during quiet times on holiday, at home or maybe in the garden. All are available free and online.
Gross domestic product (GDP) is the benchmark for assessing economic progress. In this article economist Diane Coyle asks whether policymakers should place less weight on GDP and consider a wider range of factors which influence wellbeing. “While counting economic activity such as output of cars or meals out, GDP leaves out non-monetary costs such as pollution; it ignores inequality and work-life balance, and counts ‘bads’ (more lawyers, more weapons purchased) as ‘goods’.”
In this New York Times article, columnist David Leonhardt canvasses economists, politicians and business executives to assess how the pandemic will reshape America. He contends there will be fewer local newspapers, department stores, malls, small universities and business travel – and more big-box stores, online retail, working from home and climate action.
The lockdown has prompted a home-baking boom. Views of the video “how to make bread” on the BBC Good Food website rose nearly seven-fold in the last two weeks of March. This long read explores how one of the largest flour manufacturers in the US has coped with unprecedented demand during the pandemic. It is a story of resilience and adaptability in the face of unimagined change.
In a speech last week Jonathan Haskel, an external member of the Bank of England’s Monetary Policy Committee, gave a fascinating insight into the obstacles facing the UK’s economic recovery. Citing Google search data he notes that British consumers appeared less willing to spend money at pubs and restaurants than people in other countries: “The path of recovery crucially depends on the fear of infection”.
Cash use has been falling in the UK over the last decade, a subject we have written about before in the Monday Briefing. Fears about the role of notes and coins in transmitting the virus may accelerate this trend. This somewhat contrarian FT Alphaville piece explores data showing a surge in cash withdrawals just before the lockdown. Americans, too, are holding more cash. We may be in a digital age, but when times are tough people still seem to like the comfort of cash.
Even before the lockdown the world seemed to be in love with Strava. The fitness app offers communities, training data and motivation to millions of athletes. By fuelling demand for activity and human connection the pandemic seems to have given Strava a further boost. Data from network EE shows that Strava use, measured by user count and data usage, has more than tripled in the UK since the lockdown. The success of many social technology apps rests on fostering networks and relationships which keep users coming back. This article tells the story of how Strava became a must-have for millions of runners and cyclists.
In a landmark decision last week EU leaders agreed to create a €750bn EU recovery fund to support member states worst hit by Covid-19. The fund will be financed by European Commission borrowing, instead of by individual member states, and disbursed over the next three years. The decision establishes a new EU-wide safe asset and will bolster the role of the euro as a reserve currency. Although the recovery fund is meant to be a one-off it establishes a historic precedent for an EU fiscal union. The recovery fund, worth 5% of EU GDP over three years, is relatively small but will be significant for the worst-hit member states. ING Bank estimates that in 2021-22 Italy and Spain could receive grants worth 2.5% and 3.5% of GDP, respectively. Smaller countries like Bulgaria and Greece could receive grants worth over 6% of GDP. Financial markets responded positively to the news, with Italian bonds rallying and the euro rising against the dollar.