EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
Related content
Prepare now for the new era of selective globalization
Exploring scenarios for the world in five years reveals divergent paths for geopolitics, economic policies and company strategies. Learn more.
The downturn will affect regions differently
Globally, the economic landscape is complicated by elevated macroeconomic uncertainty, ongoing geopolitical tensions and constrained product and labor supply.
In Europe, economic activity is rapidly cooling with elevated inflation weighing on consumer and business outlays and forcing the European Central Bank to tighten monetary policy at the fastest pace since 1999. Europe’s energy situation is particularly concerning, and while government action to minimize energy shortage risks and shield households from surging energy prices may avoid the most somber of outcomes, energy supply disruptions will remain a key concern over the next couple of years.
In Asia, real GDP growth has slowed sharply in mainland China with household spending, housing activity and manufacturing output restrained by the zero-COVID-19 policy and a worsening property sector downturn that has led some people to boycott mortgage payments. The slowdown in economic activity in China is weighing on growth across its major Asian trading partners. Meanwhile, in Japan, the post-COVID-19 pandemic consumer spending recovery is still not complete, and momentum is slowing as higher inflation is squeezing household incomes.
In the US, the high inflation environment is weighing on consumer morale and purchasing power, and it is forcing many households to dip into savings and borrow to finance outlays.
While consumers remain willing to spend, many families, especially those at the lower-to-median end of the income spectrum, are feeling increasingly constrained by elevated prices and rising interest rates.