That is, we smooth our living standards in the face of swings in income. This behaviour means that there is some slowing in GDP growth, but much less than would be the case, were our spending behaviour to be confined to following much more closely the reduction in income.
At the same time, as we all know, a long-term adjustment has been under way in the structure of households’ balance sheets, which has been tending to elevate spending relative to income for some time. It so happens that the direction of this effect has, in the past couple of years, suited what was needed to adapt to the international conjunctural circumstances.