Weekly Updates
Weekly Updates
- The world is increasingly complex, but financial markets like economic data to be simple. But relying on simple data averages means investors risk missing opportunities.
- A key growth driver in 2022 will be developed economy consumers’ spending power. As the savings and stimulus cheques of 2021 have been consumed, future growth depends more on real income growth. Average incomes have grown less than average consumer prices. But beneath that average a lot is happening. For example, younger people have received large wage gains, giving them real income growth.
- Furthermore, consumer prices do not represent everyone’s spending power. US households that do not drive a car are experiencing an inflation rate half that of the headline, for instance. The point is not to exclude certain items until inflation disappears. The point is that the spending power of a large minority of households is significantly better than consumer price inflation suggests.
- An average of income growth less an average of inflation shows a loss of consumer spending power in every major economy. But because the details of both income growth and consumer prices show a very wide range, there are many in society who have an increase in spending power. That could matter a lot to the earnings of some companies.
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