Economies that implemented lockdowns earlier in the year suffered substantial plunges in consumer spending across the board. But for household incomes, the period is one of contrasting fortunes.
The plunge in hours worked triggered a notable drop in disposable incomes in Europe, although on a far smaller scale than the fall in hours worked. But elsewhere, most notably the US and Canada, disposable incomes surged.
While the US and Canada saw particularly sharp jumps in household savings rates, in the next few quarters disposable incomes look set to shrink as government transfers fall. In Europe, the hit to incomes and spending was more frontloaded, with Q2 likely to have been the low point.
As a result, we expect eurozone households to record stronger spending growth compared to the US over the rest of this year and in early 2021.