Economy in brief: April 2022

The embattled consumer

The past month has seen bad news accumulate for consumers as we face into the biggest hit to living standards in 50 years. Consumer inflation peaked at a higher-than-expected 7% in March – the highest since March 1992. Retail sales also surprised to the downside in March, as people cut back on food and fuel spending. Meanwhile, the GfK consumer confidence measure plummeted to -38 in April from -31 in March – its weakest level since July 2008. While some of the weakness in retail and online sales reflects consumers switching back to pre-COVID-19 spending on consumer services, that is unlikely to cushion discretionary spending on consumer services from the overall hit to disposable incomes. With consumer spending accounting for two thirds of the economy, the bleak outlook for consumer incomes has a severe impact on the economic outlook.

Inflation drives the IMF to downgrade the global outlook