Soaring energy prices will slow consumption growth

In our base case, soaring energy prices and pass-through of higher energy input costs to manufactured goods will knock off 1.5%-pts from households’ disposable income. While the still high savings rate provides a substantial buffer, slowing income growth is another headwind to consumption growth. We’re lowering our GDP growth forecast for this year to 2.8%, though we are still more upbeat about the economic outlook than most other analysts.