America is heading for a soft landing while Britain faces its worst drop in living standards on record
Despite dire predictions of a widely expected recession in the US, the economy remains strong for now. Americans are struggling with inflation and rising interest rates, are concerned about layoffs particularly in the tech industry, and have little confidence in the direction of the economy. Trust is even worse among CEOs.
But as bleak as the mood is, the economy is strong on many fronts and there is a clear possibility of a “soft landing,” as the Biden administration is quick to remind Americans. Brian Deese, President Joe Biden’s top economic adviser, said last month the US economy has enough “strength and resilience” to protect it from a recession.
It can be a bit confusing, with strong economic data such as low unemployment on the one hand and distressing forecasts and worrisome layoffs on the other.
Across the pond, Britain has had a difficult year, marked by political chaos, the death of a beloved queen and stubbornly high prices that have made it difficult for many families to make ends meet.
Things aren’t getting any easier anytime soon, according to a report by the Office for Budget Responsibility released on Thursday. The nation has entered a recession that will last more than a year. Taking into account rising prices, disposable household incomes would fall by 4.3% in the current financial year and by 2.8% in the next.
The 7.1% cumulative decline over the biennium would be the “biggest fall on record” for disposable household income per person, tweeted Paul Johnson, Director of the Institute for Fiscal Studies, an economic research institute in the UK. He called the numbers in the OBR report “simply breathtaking”.
British inflation hit 11.1% in October, a 41-year high, mainly due to rising household energy bills and food prices, the Office for National Statistics said on Wednesday.
The OBR now forecasts the economy to contract by 1.4% next year, while in March it expected growth of 1.8%.
“The medium-term fiscal outlook has deteriorated significantly since our March forecast on the back of a weaker economy, higher interest rates and higher inflation,” the OBR said on Thursday.
The expected slump will wipe out the growth in living standards of the past eight years, effectively turning the clock back to 2013, the government forecaster said.
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