Jun 17, 2022 - Economy

Consumers worldwide feel gloomy about the economy

Global Consumer Confidence Index
Data: OECD; Chart: Thomas Oide/Axios

Americans aren't the only ones unhappy with how things are going. Consumer sentiment around the globe hasn't been this bad since 2009, when the world was mired in a historic recession.

Why it matters: Rising prices are pressuring household budgets and pushing down consumer confidence in a slew of nations, a sign that households may tighten their belts and spending will dry up.

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

How it works: For an indication of how the globe's consumers are feeling, look at the Organization for Economic Cooperation and Development's consumer confidence index, which is comprised of household surveys conducted around the world about expected financial situations, ability to save, the general economy, and the labor market.

  • The index has been below 100 for eight months, a level that signals pessimism about future economic developments. That may result in less consumption and more saving among households, the OECD says.
  • Just two of 38 OECD nations are above that threshold on an individual basis: Hungary and Korea. This time last year, all but nine were.

The backdrop: There's been a steady drumbeat of bleak economic forecasts about the global economy, though projections by organizations like the OECD and the World Bank see few (if any) nations actually falling into a recession.

But the risks are rising: Since Russia invaded Ukraine, oil and gas prices have soared and rising commodity costs have pushed worldwide food prices to historically high levels. Major central banks are rushing to contain inflation and borrowing costs are rising on top of sky-high costs, squeezing consumers in real-time.

  • "Weaker consumer sentiment will translate to lower spending, though we don't expect to see a collapse in consumer spending along the same lines as the one we've seen in consumer confidence measures, which always tend to be more exaggerated than actual consumption,"┬áCailin Birch, a global economist at The Economist Intelligence Unit, tells Axios.

The bottom line: "At a global level, inflation is now consumers' top concern," says Nicolas Boyon, a senior vice president at Ipsos, which tracks consumer sentiment across nearly two dozen countries. "As prices rise, consumers have become increasingly concerned about their future financial situation."

  • One outlier is Saudi Arabia, Ipsos finds, where the "remarkably high level of consumer optimism is consistent with many reports indicating rising oil prices have boosted its economy," Boyon says.
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