OECD countries lose purchasing power in 2021 despite GDP growth

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OECD countries lose purchasing power in 2021 despite GDP growth

Among the seven largest economies in the world, the largest drop in household income has occurred in Canada, which in the last quarter of last year registered a decline of 2.4% compared to the previous one.

The world’s largest economies lose purchasing power. Despite the fact that the Gross Domestic Product (GDP) of the countries of the Organization for Economic Cooperation and Development (OECD) increased in the fourth quarter of the year, the purchasing power of households has been reduced in the last quarter of 2021.

The Paris-based organization points out that, despite the fact that the economy of member countries has expanded, the curb on aid related to Covid-19 has caused a drop in household income. Nevertheless, the OECD points out that household income continues at 3.8% above those registered in 2019, before the pandemic.

Among the G7 countries (excluding Japan, which has not released data yet), the biggest drop in household income during the last quarter of 2021 was in Canada, where the index plunged 2.4%. They also recorded falls in the United States, Germany and the United Kingdom, countries in which revenues fell by 1.3%, 0.7% and 0.2%respectively.

Beyond the large economies of the group, other countries of the organization have registered a more pronounced fall in income. It is the case of Belgium, with a decrease of 3%, and Finland, with a cut of 2.7%. For its part, Spain recorded a decline of 1.6%. In contrast, other countries recorded a strong increase: Belgium (3.2%), Portugal (3%) and Denmark (2.2%).

In 2021, the GDP of the OECD countries increased by 5.1% year-on-year, a growth much higher than that of 2020, marked by the pandemic, which was 1.7%. Regarding income per household, Italy, France, the United Kingdom and the United States recorded an increase in 2021, but the organization differentiates between the European and American strategy.

Canada and the United States made large monetary payments to households in the second quarter of 2020, a policy that the United States repeated in the first quarter of 2021”, explains the entity. “As these temporary payments have decreased, income has fallen,” they maintain from the OECD.

For their part, European countries focused on assisting businesses and protecting employees. However, throughout 2021, some divergences were observed between European countries, “with an increase in real income per capita of households in France and Italy, while Germany and the United Kingdom recorded a decline in per capita household income”, adds the entity.

Given this context and the start of the war in the first quarter of the year, the OECD has already anticipated a slowdown in the European economy due to rising inflation and the downward outlook for the manufacturing sector. This is how the entity has presented it through its advanced composite indicator, which indicates fluctuations in the economic cycle between six and nine months in advance. Outside of Europe, the indicator rose in the United States for the third consecutive month and in Japan.

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