A global recession could be coming;
Commodity markets declined due to lower demand;
Europe also faces the prospect of what one economist has called a "carbon shock treatment" of higher energy prices, and last but not least, the ultimate impact of higher rates remains unknown.
The American newspaper "Financial Times" published an article in which it said that there is no need to worry;
Household consumption may save us;
They will be relied upon as the primary shock absorbers of today, the ability to bear the brunt of real income being reduced by inflation while spending is also made to avoid stagnation.
The way to achieve this vision, the newspaper added, is to spend what has become known as pandemic savings.
During the Corona pandemic;
The gap between consumption and income has become very wide especially in the United States and the United Kingdom.
Most economists assume - according to the newspaper - that as real incomes fall, families will be able to maintain their spending by taking advantage of these pandemic windfalls.
The newspaper gave an example in the statement issued by the Congressional Budget Office, which says: "According to the projections of the Congressional Budget Office, large amounts of accumulated savings and high net family wealth support consumer spending in the future."
The statement adds, "Personal savings have risen to high levels during the pandemic, because the government's financial support for many families has compensated for the decline in income and because many families have reduced their expenditures. Large balances, such as deposits in checking or money market accounts, indicate that Some families plan to spend a lot of those accumulated savings over a relatively short period."
Inflationary shock absorbers
It's not a good idea to have that assumption when it comes to the US growth outlook, but it's necessary;
With consumption accounting for two-thirds of US gross domestic product, the latest forecasts from the Congressional Budget Office show that households must spend if the US economy is to stay out of recession.
This example is a similar story to what is happening in the United Kingdom;
In its latest quarterly forecast, the National Institute for Economic and Social Research spared the British economy from falling into a recession by promoting good household spending habits.
The problem, says the paper, is whether households in the US and UK will actually live up to their promise as inflationary shock absorbers and last resort for spending;
The latest quarterly figures reveal that US and UK reporting could be very different.
During the pandemic, income in the UK has been maintained through a system of temporary paid leave combined with extra savings due to household spending less during the Covid lockdowns, while in the US the situation is different;
Government checks have led to huge rises in income which have gone a long way towards creating excess savings.
as time passes on;
Families are now again spending more or less than they earn in both countries, however;
Consumption is beginning to outpace disposable income in the United States, and if this path continues, it could be a sign that American pandemic savings are being spent.
There are no signs of this yet in the UK, but there is still hope;
The latest numbers include the effect of the omicron mutant and a clearer picture will undoubtedly appear once the second quarter numbers are released.
Whatever the end result says - the expectations from families are noteworthy and we should all hope that they will be up to the task.