The recovery from re-opening will not undo the damage done.
1) Lockdowns will leave a painful legacy, with brisk mechanical rebounds falling far short of full recovery.
2) Fear of vaccine-resistant strains mean activity restrictions remain part of the policy toolkit
3) Monetary policy lacks the power to stimulate activity independently of fiscal policy
4) De-globalisation continues with the populist pursuit of supply chain independence
Output suffers from restraints while inflation distortions echo.
1) Vaccination success is moving the market but not activity restrictions or relative performance. The long-term pain will be severe, with recent savings not splurged.
2) HICP will continue to be distorted by the new weightings, mostly to the downside after the Jan-21 surge, with the Consensus set to be regularly surprised.
Lockdown is destroying UK GDP while Eurostat inflates the HICP
1) Activity restrictions are lasting longer and doing more damage than widely assumed. We remain at the bottom of the Consensus for UK GDP in 2021.
2) Eurostat is pushing HICP inflation to use 2020 expenditure data for weights, with the probable new mix driving our forecast to the top of the euro area Consensus.