Rising prices make consumers around the world gloomy about the economy

Data: OECD; Graphic: Thomas Oide/Axios

Americans aren’t the only ones unhappy with the way things are going. Global consumer sentiment hasn’t been this bad since 2009, when the world was mired in a historic recession.

Why is this important: Rising prices are putting pressure on household budgets and reducing consumer confidence in many countries, a sign that households may be tightening their belts and spending will dry up.

  • “The Fall of Feelings [is] being pushed by rising inflation; an associated rise in interest rates; and a loss of confidence around the economic outlook, both here and abroad,” said Bill Evans, an economist at Westpac, an Australian bank that conducts a survey of consumer sentiment in the country, this week.

How it works: To get an idea of ​​how the world’s consumers are feeling, look at the Organization for Economic Co-operation and Development’s Consumer Confidence Index, which includes surveys of households around the world on financial situations. expected, ability to save, general economy and labor. market.

  • The index has been below 100 for eight months, a level that signals pessimism about future economic developments. This could translate into lower consumption and higher savings for households, according to the OECD.
  • Only two of the 38 OECD countries exceed this threshold on an individual basis: Hungary and Korea. At this time last year, all but nine were.

The backdrop: There has been a steady drumbeat of gloomy economic forecasts for the global economy, although projections from organizations like the OECD and the World Bank see few nations (if any) actually falling into recession.

But the risks increase: Since Russia invaded Ukraine, oil and gas prices have skyrocketed and rising commodity prices have pushed global food prices to historic highs. Major central banks are racing to contain inflation and borrowing costs are rising on top of exorbitant costs, squeezing consumers in real time.

  • “Lower consumer confidence will translate into lower spending, although we don’t expect to see a slump in consumer spending in the same direction that we’ve seen in consumer confidence measures, which always tend to be more exaggerated than actual consumption,” Cailin Birch, global economist at The Economist Intelligence Unit, tells Axios.

The bottom line: “Globally, inflation is now the top concern for consumers,” says Nicolas Boyon, senior vice president at Ipsos, which tracks consumer sentiment in nearly two dozen countries. “As prices rise, consumers are increasingly concerned about their future financial situation.”

  • One outlier is Saudi Arabia, according to Ipsos, where “the remarkably high level of consumer optimism is consistent with numerous reports that higher oil prices have boosted its economy,” Boyon said.
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