In Brief: Omicron Impacts Economy, BNPL Slows

Weekly Reports | Jan 14 2022

Weekly Broker Wrap, In Brief: omicron economic impacts; consumption growth and consumer savings; buy now pay later slows. 

-Omicron spread exacerbates supply chain issues
-Savings rates crucial for global growth outlook
-Growth in buy now pay later slows among increasing competition
-Financial platform operators enjoying structural inflows

By Danielle Austin

Omicron-driven supply issues to impact on economy 

Supply chain disruption is escalating as omicron impacts loom and covid cases in Australia accelerate. Despite eased restrictions, mobility around the country has declined and contributed to supply shortages that Morgan Stanley expects will impact on the economy. 

The broker is forecasting gross domestic product in the first quarter of 1.1%, down from a previous forecast of 2.0%, followed by a notable rebound in the second quarter to 2.1%, reducing its 2022 gross domestic product growth forecast for Australia to 4.5% from 4.9%. 

Consumer spending and saving subject to large margins of error

Analysts have noted an unusually high level of risk to forecasts of consumer spending and saving behaviours given numerous unpredictabilities at play currently.

Given expected weak income and disposable income growth in the coming year, trends which are traditionally closely correlated to consumer spending, Oxford Economics’ forecast of continuing strong consumption growth would likely rely on a decline in consumer savings. Further, the rise of covid variants has seen restrictions reinforced in many regions, and analysts expect prolonged restrictions could cause a surge in savings rates. 

However, further reopening of global markets could see spending increase and discretionary spending may trend upwards in sectors like recreation and hospitality. Despite the possible error margin, Oxford Economics analysts expect a 4.5% rise in consumer spending in G7 countries following last year’s 5.8% increase, and a decline in US consumer saving to 6.8% in 2022 from 12.3% in 2021. 

Buy now pay later growth slows

Analysts at Citi are keeping track of website traffic in order to keep a finger on the pulse for companies in the buy now, pay later sector.

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