Weak Global Consumption Drags Economic Recovery Momentum Worldwide
In the post-pandemic era, the global economy was expected to shake off its slump and achieve a robust recovery, yet persistently weak consumption has emerged as a core bottleneck dragging down recovery momentum. The International Monetary Fund (IMF)’s latest report shows that global personal consumption expenditure growth in 2023 dropped by over 2 percentage points from its 2021 peak, with the pace of consumption recovery in many major economies falling far short of expectations.
Multiple factors are contributing to this sluggish consumption landscape. First, stubbornly high inflation has eroded consumers’ purchasing power. In Europe and the United States, inflation rates have remained elevated for months, driving up prices of essential goods like food and energy. This has forced households to cut back on non-essential spending: U.S. retail data for the third quarter of 2023 revealed year-on-year declines of 1.2% and 0.8% in clothing and entertainment consumption, respectively. Second, geopolitical conflicts and supply chain volatility have amplified market uncertainty. Inventory backlogs and fluctuating commodity prices have further dampened consumers’ willingness to spend. Additionally, post-pandemic income expectations are polarized: while savings rates for some groups have declined, income growth remains sluggish, and low-income populations are still squeezed by rising living costs, leaving their consumption capacity unable to recover.
As the main engine of global economic growth (accounting for over 60% of global GDP), weak consumption directly transmits pressure to the production side. Reduced corporate orders have led to low investment willingness, with manufacturing PMIs in many economies remaining in contraction territory for consecutive periods. For example, the Eurozone’s manufacturing PMI stood at 44.2 in the fourth quarter of 2023, staying below the boom-bust line for 18 months. Meanwhile, weak consumption has exacerbated global trade sluggishness, leaving emerging markets dependent on exports facing challenges of insufficient external demand, making their economic recovery an uphill battle.
To address this dilemma, policymakers worldwide are seeking a balance. Some central banks are slowing their interest rate hike pace while controlling inflation to avoid overly suppressing the economy. Governments have introduced targeted fiscal policies, such as issuing consumption subsidies to low-income groups and reducing consumption taxes, to directly boost consumption capacity. Moreover, promoting supply chain stability and lowering trade barriers can help ease commodity price pressures and enhance consumer confidence.
Weak global consumption is the result of intertwined factors. It requires not only short-term stimulus policies from various countries but also long-term structural reforms, such as raising residents’ income levels and improving social security systems, to fundamentally restore consumption momentum and propel the global economy back onto a path of steady recovery.
