Weekly Updates
Weekly Updates
- Consensus growth forecasts for 2023 have been steadily revised higher in the US, UK, and Euro area. The unexpected resilience of consumer spending is a part of this optimism. While consumer spending growth may be slowing, it is not collapsing. Three broad factors support consumers.
- Labor markets provide two forms of support. Unemployment rates remain generally low, so job security is good for many people. This security reduces the need to accumulate savings as an insurance against unemployment. There has also been an increase in households with multiple income streams—generated by second jobs, or by being employed in side hustles.
- Although lower income households have generally spent pandemic-era savings, middle income households on both sides of the Atlantic have healthier balance sheets. Households will have greater willingness to spend if there is a cushion of savings to fall back on. As middle income households have more weight in consumer spending, their balance sheets matter disproportionately.
- Although real wages have fallen, the cost of living increase for many households is currently lower than consumer price inflation. This reflects the difference between prices paid and the theoretical prices of some consumer price components. There is also regional variations in inflation. A lower cost of living means consumers have more spending power than headline statistics suggest.
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