Real Household Income Across OECD Countries Declines as Recession Looms

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Real household income across industrialised nations, including Ireland, fell in the first quarter of 2022 as soaring prices reduced the buying power of consumers, according to the Organisation for Economic Co-operation and Development (OECD). Economists fear a sharp decline in consumption by cash-strapped households will trigger a recession in the euro zone, the Irish Times reported. The OECD said that real household income per capita declined by 1.1 per cent during the first three months of the year but remained nearly 3 per cent higher than before the pandemic. “The decline in real household income per capita was partly due to increases in consumer prices, which undermined household income in real terms,” it said. Most agencies are expecting an even bigger decline in real incomes over the coming months as businesses pass on higher input costs to consumers. With inflation in Ireland expected to average approximately 7 per cent this year and earnings expected to grow by just 3.5 per cent, real incomes for Irish households will contract by up to 4 per cent, according to the Economic and Social Research Institute, representing the biggest drop in living standards since the 2008-2009 period when the economy imploded in the face of a global credit crunch. Among the G7 economies, the impact of inflation on households in the first quarter of 2022 was particularly clear in France, where real household income per capita fell by 1.9 per cent and Germany, where it fell by 1.7 per cent, the OECD said. Elsewhere in Europe, high household inflation also contributed to large falls in real household income per capita in Austria (-5.5 per cent) and Spain (-4.1 per cent). Read more.