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The Limits to America’s Pent-Up Demand

Notwithstanding the predictable release of pent-up demand for consumer durables, face-to-face services show clear evidence of lasting scarring. Consequently, with the snapback for durables likely to be finished soon, even rapid vaccination is unlikely to shorten the tough time that lies ahead for the post-pandemic US economy.

NEW HAVEN – As the second vaccine shot went into my arm, I could almost taste the instant gratification of deferred desires. Having done without for nearly a year, it was time to indulge.

While I was lucky enough – actually, old enough – to be included in the first wave of inoculations, the rest of America is about to follow. The possibility that broader vaccine distribution will lead to “herd immunity” by the end of 2021 is no longer fanciful. And with the end of the COVID-19 nightmare, goes the argument widely discounted in financial markets, long-deprived US consumers can finally relax and enjoy the glorious V-shaped recovery.

If only. The concept of pent-up demand is well studied in economics. While it typically applies to the consumption of durable goods – cars, furniture, appliances, and the like – it has also been used to describe residential construction activity and business investment in plants and equipment.

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