‘I doubt anyone is mad enough to be booking a holiday yet.’That’s what personal finance expert Andrew Hagger said when our reporter George Nixon asked
‘I doubt anyone is mad enough to be booking a holiday yet.’
That’s what personal finance expert Andrew Hagger said when our reporter George Nixon asked him if he thought the lockdown savings phenomenon would continue.
His quote piqued my interest on two counts: firstly, in how dramatically the world has changed that booking a holiday is now seen as outlandish behaviour and, secondly, because I recently eyed up a trip away.
Hot tub sales rocketed in the first lockdown and big ticket item spending like this is likely to get more expensive in 2021
I should be going away tonight with my wife for a long weekend snowboarding in Austria. An annual trip that does a lot to shake off the January blues.
We’re not going, of course, but eternal optimist that I am, I seriously contemplated booking Easter holiday flights to the mountains last week.
Despite demand for airline and holiday bookings being extremely thin on the ground right now, the flights on offer were neither plentiful nor cheap.
Airlines hacked at their schedules as the coronavirus situation worsened in autumn and then cut back again as winter brought more bad news.
On the basis that it’s currently illegal to leave the country for a holiday – and will remain so for an unspecified amount of time – there’s little incentive for them to add extra flights just yet.
Instead, I suspect that if I can get to the mountains for a Covid-compliant late-season snowboard and ski trip with the family, I will pay through the nose for the pleasure.
And I have a suspicion the same thing will apply to any expensive spending I do this year once lockdown lifts – and that we are going to see a bout of big ticket inflation.
Officially UK inflation is running at a low level, with the latest ONS figures showing CPI inflation at 0.3 per cent in November.
This is due to the deflationary effects of lockdowns to supress the coronavirus pandemic.
How swiftly inflation picks back up is a matter of some debate. But even if vaccines are rolled out as rapidly as hoped and restrictions are eased, we aren’t going back to normal for a long time and the hangover won’t be shifted easily.
The ONS’s basket of goods-based approach to keeping tabs on the cost of living is just one broad measure of how inflationary life is, however.
It’s long been commented that those in particular sections of society, of different ages and with various lifestyles will feel inflation differently and if you drill down further each of us has our own personal inflation rate.
The same is true of our categories of spend: there’s the rise in our essential costs of living, the change in our regular discretionary spending, and the inflation we feel when properly splashing out on things, such as holidays, cars, home improvements, or big ticket treats.
And, I’ve got a horrible feeling that just as we’re able to start treating ourselves again, doing so is going to get considerably pricier.
Lots of people are very eager to start enjoying life again when they can – and some have amassed sizeable lockdown savings pots to do so
That sounds perverse when you look at the UK’s bigger economic picture and rapidly mounting job losses, but a big chunk of the country has continued earning, some have amassed sizeable ‘lockdown savings’ from seeing their spending curtailed, and lots of people are very eager to start enjoying life again when they can.
The pandemic has hit both demand and supply: factories were shut and then had to run at lower capacity, logistics were disrupted, and businesses when open have to space customers and staff out and so can cater to less people.
With demand proving more robust that many thought it would there has been a destocking, and from building supplies, to electric cars and laptops, it’s harder to get your hands on a fair bit of stuff.
That allows suppliers and retailers to keep prices firm and for the things that people really want, it lets them bump prices up.
We’ve seen early signs of this big ticket inflation already: in the surprise hot tub sales boom, the staycation surge that meant you couldn’t book a decently-priced summer holiday let after late July, and the sky-high price of summer flights in the short window when people could get away in the school holidays.
These were just bursts of big ticket inflation in specific places though. If the vaccination plan works – which I sincerely hope it does – and we get our lives back, expect it to hit across the board.
People want to treat themselves and 2020 taught them to seize the moment while they can.
Supply and demand says if you want to splash out on the same stuff as others in 2021, it’s probably going to get more expensive.