Can credit sustain growth?

Household purchasing power is declining in the United States and the euro zone. This may lead to a fall in household demand and a risk of recession, unless a fall in the household savings rate offsets the fall in their real income and prevents consumption from falling. Two mechanisms could lead to a fall in the household savings rate: For households that have built up additional savings, especially liquid savings (primarily wealthy households), a reduction in these financial asset holdings ; For low-income households that have not built up additional savings, credit (particularly consumer credit ) . We see: In the United States, strong growth in household credit, no fall in households ’ cash holdings ; In the euro zone, faster growth in total household credit, no fall in household deposits. The use of credit will have a limit: if it prevents a fall in activity in the short term, it will push central banks to conduct a more restrictive monetary policy, and the rise in interest rates will eventually curb credit. It is when this happens that inflation will start to fall under the effect of weakening domestic demand. At present, retail sales have slowed in the United States, but not in the euro zone. There is no sign of a slowdown in housing starts for the time being.