Private consumption surged ahead of the last two sales tax hikes as households brought forward spending but collapsed as soon as the tax had been raised. The data thus far suggest that consumers have yet to bring forward any spending ahead of the hike scheduled for 1st October. That’s consistent with our view that measures taken by the government have reduced the incentive for households to splurge ahead of the tax hike. Indeed, we suspect that both the boost to consumption before October as well as any subsequent slump will only be a quarter as large as they were in 2014, when the tax was last raised.
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