Since 2026, multiple economies including the United States, Japan, Europe and South Korea have rolled out consumption stimulus policies to counter falling real purchasing power and the risk of 'low growth plus high inflation'. But constrained by the energy crisis, high inflation and fiscal deficits, the effectiveness of these measures remains to be seen.
In the US, Commerce Department estimates released October 29 show third-quarter GDP grew 3.4% annualized, the fastest in a year, but the personal consumption expenditures price index rose 3.6% year-on-year in September, accelerating to a six-month high.
A Pew Research survey found 84% of voters who cast early ballots ranked the economy as the top issue. 'Voters don't look at GDP numbers when they vote. Inflation is still high, and I think that number ultimately matters more,' Republican strategist Haye told Bloomberg.
The New York Times noted the US economy presents two faces: resilient growth, consumption and business investment on one hand, and persistent inflation that keeps ordinary families from feeling the benefits on the other.
Soaring living costs are also visible in gasoline prices and consumer sentiment. AAA data show average regular gasoline and diesel prices are about $1.19 and $2.65 per gallon higher than a year ago. The University of Michigan consumer sentiment index has fallen to the second-lowest level in the survey's 74-year history.
Radio France Internationale reported energy prices are a main driver of US inflation. The continued Middle East conflict has kept oil above $100 a barrel, far above the pre-war level of under $70, pushing up gasoline, diesel and operating costs across aviation, agriculture, heating, freight and transport.
In Europe, eurozone inflation rebounded to 3.8% in September, with energy prices up 18.8% year-on-year, while wage growth lagged, eroding real purchasing power. The EU's removal of the tariff exemption for parcels under 150 euros has further pushed up consumer prices. French consumer confidence has fallen to a 13-year low, and EU GDP growth is expected to slow from 1.5% in 2025 to 1.1% in 2026.
On tax side, the US 'One Big Beautiful Bill' contains multiple personal income tax provisions whose relief is being delivered as one-off refunds in early 2026, seen as a 'delayed stimulus' for this year's consumption. Higher SALT deduction caps also benefit residents of high-tax states.
European countries are stimulating consumption through green-transition subsidies, income support and consumption facilitation. France plans to raise annual EV support from 5.5 billion to 10 billion euros by 2030 with a social leasing program offering 100,000 EVs to low-income drivers; Italy offers purchase subsidies up to 11,000 euros based on income and scrappage; Germany has reinstated EV subsidies of 1,500-6,000 euros per vehicle plus 10-year vehicle tax exemption and home charger subsidies.
France raised its minimum wage (SMIC) by 2.41% from June 1, 2026. The EU has also launched an 86.7-billion-euro Social Climate Fund and a 'Citizens' Energy Package' to cushion households from energy price rises.
Japan has decided to cut the consumption tax on food from 8% to 1% over two years starting April 2027 — the first tax cut since the consumption tax was introduced in 1989. Japan abolished the provisional gasoline surtax at end-2025 and the diesel delivery tax surtax on April 1, 2026, and launched a child and childcare support scheme in April 2026. Some local governments are issuing digital vouchers; Osaka Prefecture gave 10,000-yen digital coupons to children under 18, pregnant women and young people aged 19-22 for buying rice and other food.
South Korea's key measures this year include a nationwide discount festival, consumption vouchers and subsidies, and upgraded EV subsidies. The government will hold a two-week nationwide autumn promotion event supporting small merchants and traditional markets; vouchers of 100,000-600,000 won per person will be issued to the bottom 70% of income earners via emergency budget, while fuel price caps remain. South Korea raised its EV subsidy budget for passenger cars from 780 billion won in 2025 to 936 billion won in 2026.
Yet the real effects are constrained by multiple factors. The Bank of Japan estimates the food tax cut will knock 1.3 percentage points off CPI in fiscal 2027, but analysts note the fiscal gap created each year still needs to be filled, with funding plans yet to be decided.
Former Shizuoka University professor Kyoji Koike pointed out that sellers have no obligation to cut prices even if the tax rate falls, and food retailers already squeezed by soaring costs may have to raise prices anyway, making it hard for the tax cut to translate into lower retail prices.
European stimulus also faces high government debt and opposition within the European Commission, plus uncertainty from social unrest. In South Korea, growth forecasts have been downgraded and youth unemployment is rising; researchers at the Korea Consumer Agency note consumers will not accept price hikes followed by discounts, while forced discounting squeezes small merchants' margins.
