By: Rajat

In reply to Ricardo.

Sorry – this perhaps reveals my lack of familiarity with the data: why is the graph labelled (log) real PCE? PCE of 6.75% is a bit high for nominal consumption growth but super high for real consumption growth.

But I take your broader point – consumption growth has been a lot slower this time around. Presumably the appropriate response is to prod it back up to something more like 5%? Conversely, Chris Joye had an article today talking about why this housing boom is different, on the basis that household disposable income is growing at 3% this time unlike the previous 6-8% at previous peaks (even 10% in late 07/08). He reckons this is the new normal and so we need to get used to lower house price growth. Perhaps. But it’s a similar issue as the US with a different reaction. I would prefer we got back up to 5-6% NGDP growth here rather than continue a somewhat painful adjustment to 3-4%.