Six economic factors to keep an eye on in 2022

Highlights 

• Experts are slightly less fearful of the potential impact of the pandemic on the economy, even as the new Omicron variant lurks in the background.
• Savings are expected to steer the economy in the coming year while inflationary fears may arise due to supply constraints.
• Job requirements are likely to remain high in 2022, with higher degree of retail trade happening digitally.

As another year goes by under the influence of the pandemic, the economy is gearing up for potential changes in 2022. The perspective surrounding the pandemic has changed drastically since its onset. The economic outlook in light of the pandemic in 2022 is very different from what it was almost a year ago. Experts are slightly less fearful of the potential impact of the pandemic on the economy, even as the new Omicron variant lurks in the background. Thus, there have been certain economic developments underpinning this fresh confidence for the economic outlook in 2022.

ALSO READ: What is Australia doing to curb omicron?

In this backdrop, here are some important economic factors that would be crucial in determining how the economy fares in 2022.

Savings led consumption is expected

Savings helped the economy stand back on its feet during the economic slowdown that occurred because of the first wave. In a similar fashion, savings are expected to steer the economy in the coming year as well. Surplus savings helped stir consumption in 2021, and the same can be expected in 2022.

The demand for consumer discretionary products was high after the delta variant induced lockdown was removed. Going forth, consumer demand would be backed by savings and would most likely remain high.

Inflationary fears

Inflation has remained a persistent issue in 2021 and could seep into 2022 as well. With supply constraints casting a shadow of doubt for producers, prices could continue to rise as demand remains unmatched.

However, some experts believe that inflation may not rise as vigorously as expected. The factors fueling up inflation are largely perceived to be temporary. Thus, inflation might dampen towards the end of 2022, specially if interest rates are hiked

Digital shift in retail

A widely observed trend in 2021 was the shift to digital means of conducting business. Many retail corporations developed stringer online channel to boost sales even as physical shops remained closed. Not only that, but small businesses also integrated online product outlets into their business.

Additionally, many retail providers also formed subscription channels. Subscription services help retain customers, which is why many companies are adopting them.

Job requirements to remain high

Data on job advertisements reveals that job requirements have increased at an unprecedented rate in November 2021. Booming business activity has led to companies looking for newer employees and conducting large hiring drives.

As consumers become savvier with digital media consumption, advertisements are companies’ gateway to market themselves among a larger audience. Over the years, companies have drastically changed how they advertise themselves. However, the importance of ads being a driving force behind sales remains high, even when consumers are at home.

RELATED READ: Will Australian job advertisements continue to recover in 2022?

Property price rise to go slower

The Reserve Bank of Australia (RBA) has outlined a positive outlook for the property market in 2022. According to the central bank, property prices growth to slow to single digits, after soaring as high as 20%.

However, this slowdown in prices might accelerate in 2023, as per Commonwealth Bank. However, some other experts have argued that homebuyers who have passed strict lending restrictions of 2021, would be better positioned for a mortgage in 2022, as compared to 2023. Thus, buyers should avoid delaying their purchases till 2023.

Healthcare and travel set to boom

Different industries have experienced a boom during various phases of the pandemic. Going by this, the upcoming phase is expected to be beneficial for the healthcare and travel industries. Healthcare companies have been doing pretty well even now, while the travel sector players could soon see business growing as borders reopen internationally. 

Bottom Line

The pandemic has been disproportionately benevolent to certain sectors. While the closure of borders was expected to bring entire economic activity to a halt, many businesses actually benefitted from consumers staying at home and working remotely. It would be interesting to see how the economy responds to various challenges in 2022.

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