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Financial News: U.S. To Outperform Major Peers In Household Disposable

U.S. To Outperform Major Peers In Household Disposable Income Growth - Oxford Economics

03/13/2024 - 12:55:00 (RTTNews)

(RTTNews) - U.S. households are set to outperform those in other advanced economies in real household disposable income growth this year, though the pace of growth is likely to slow most sharply in the world's biggest economy, Oxford Economics said Wednesday.

"While we expect annual real household disposable income growth to slow most sharply in the U.S. in 2024, we predict it will remain the leader of the growth pack," Ben May, director of global macro economic research at Oxford Economics, said.

"The eurozone, UK, and Canadian real income growth is anticipated to hold steady, at a lower rate, while the anticipated recovery in Japan will come from a low base."

A mix of steady but unspectacular real incomes growth and relatively solid household balance sheets underpin the view that the worst may have passed for most advanced economies, but the recovery from here will be weak, the London-based research firm said.

Wage growth slowing to more normal rates and moderate growth in employment could lead to nominal income growth, except in Japan. This would partly offset the boost that lower inflation can provide to real income growth, the research firm said.

U.S. consumer spending increased by 2.2 percent last year, which was slightly below the average growth rate in the five years to end 2019, yet surpassed the growth in other advanced economies. U.S. consumers' relative resilience in 2023 was mainly down to stronger real household incomes growth, which was due to lower inflation, as the post-Covid lockdown exuberance in spending savings accumulated during the pandemic period waned, Oxford Economics said. The firm expects U.S. wage growth to be rather more stable, on the back of the ongoing robustness of the economy and the labor market.

Oxford Economics expects U.S. and U.K. consumer spending growth to outperform the other economies especially in the early stages of this year, thanks to better real income growth. While Eurozone and Japanese household spending growth is expected to be steady but unspectacular, Canada is expected to perform weaker still due to its soft patch in the first half of the year.

"Higher inflation or more subdued employment could result in a worse year for consumer spending, though a source of uncertainty is the extent to which households rolling over debt onto higher interest rates might crimp spending," May said. The firms expects the U.S. savings rate to rise from below its pre-pandemic 2015-2019 average.

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