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Real income hit and recession risk

There are two reasons why we are not expecting the fall in real incomes triggered by the rise in a host of prices and taxes from today to lead to a recession. First, further rises in employment and earnings will offset some of the drag on real household disposable incomes from higher prices and taxes. Second, we think households will be willing to reduce their saving rate further so that they can keep spending while their real incomes are falling.

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