Asia Pacific: From AI rally to consumption – The missing wealth effect
Equity rallies in Taiwan and South Korea haven’t boosted household consumption, highlighting the disconnect between financial wealth and spending habits.
The recent equity rallies in Taiwan and South Korea, driven by AI advancements, have not translated into increased household consumption. Instead, consumption remains primarily influenced by disposable income, with minimal impact from equity wealth.
In Taiwan, private consumption grew by an average of 5.3% year-on-year in the first half of the year, up from 1.4% last year, while South Korea recorded a 2.6% increase, up from 1.5%. Despite these improvements, consumption growth is modest compared to the significant rise in stock-market capitalisation, which more than doubled over the same period.
The analysis indicates that household financial wealth, particularly in the form of stocks and mutual funds, shows little correlation with consumption patterns. Policymakers are advised to monitor the potential risks associated with shifts between equity and property markets, as these dynamics could affect financial stability.
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