Chart of the Week: Global demand for goods soars

The sharp pickup in inflation across the major economies through this year has been driven by rapid increases in the prices of goods rather than services. It has occurred alongside a step increase in the goods share of household consumption, as our chart shows. As income per capita has risen over time, households have tended to allocate a smaller portion of their budget to goods, which includes essential purchases such as food and clothing, and a greater portion to services, many of which might be regarded as ‘luxuries’. The sudden change in behaviour during the pandemic was understandable, with many consumer services industries forced to close. And yet, as economies have reopened, the goods share has remained elevated in a number of countries. If the increase in the goods share is sustained, whether through continued anxiety about returning to pre-pandemic levels of social interaction on the part of some households, or for some other reason, there would be meaningful consequences for the distribution of economic activity across countries, benefiting those who export consumer goods (principally emerging economies) to the detriment of those exporting services (principally developed economies). This is one of the issues we will consider in our upcoming Global Economic and Markets Outlook.

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