Asia’s consumer recovery: winners and laggards

Articles Asia’s consumer recovery: winners and laggards 02:08 Australia India Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Consumption in Asia is recovering on easing inflation, rising asset prices, and stronger incomes, but unevenly. Structural gaps in savings, wealth mix, and income drivers are widening the divide between outperformers (Japan, Australia, Singapore, India) and slowing ASEAN economies Deepali Bhargava Source: Shutterstock Asia consumption recovery: gradual but uneven Private consumption across Asia remained subdued in 2025, reflecting soft real income growth, cautious household sentiment, and the lagged effects of earlier monetary tightening. Recent declines in oil prices are a welcome relief, easing pressure on household purchasing power and supporting sentiment.

At the same time, strong equity market gains - most notably in Japan and South Korea - have lifted household wealth, providing a partial offset to income pressures. Against this backdrop, Asia’s consumer is showing signs of recovery. But it remains uneven rather than broad-based, with increasing differentiation across the region.

Economies such as Japan, Australia, Singapore, and India are benefiting from structurally stronger consumption trends, with activity largely back to pre-pandemic levels. Cyclical momentum is also improving in Korea and Taiwan, supported by AI-driven growth, strengthening real income dynamics, and more accommodative policy settings. By contrast, consumption recoveries in the Philippines, Thailand, Indonesia, and Malaysia continue to lag.

We explore some of the divergence in consumption trajectories across Asian economies. Japan, Australia, Singapore, seeing structurally stronger consumption trends Source: CEIC "> Source: CEIC Savings buffers: uneven trends across the region Households entered the post-Covid period with elevated savings, but the extent to which these buffers still exist is increasingly divergent. Consumption in economies with limited buffers is likely to be more volatile and sensitive to near-term shocks, particularly changes in energy prices.

In North Asia (Japan, Korea, Taiwan), excess savings accumulated during the pandemic have largely been drawn down, with consumption normalisation and higher living costs eroding buffers. In parts of ASEAN, particularly lower-income economies such as the Philippines and Indonesia, precautionary savings remain thin. This leaves consumption more sensitive to income shocks and inflation.

By contrast, Singapore stands out with still-healthy household balance sheets, supported by stronger income growth and asset price gains. Japan: Wage-led recovery, wealth effects to build gradually While Japan’s consumption growth has softened recently, the underlying structural backdrop is turning more supportive. This is driven primarily by a shift toward higher wages reflecting tighter labour market conditions and improved corporate profitability.

It marks an important break from Japan’s deflationary past and provides the foundation for a more durable, income-driven recovery in consumption. Real income growth has finally turned positive. We expect the tight labour market to continue to support positive real income growth.

Strong service consumption suggests households are more willing to spend today than to save. Decisions are less anchored to expectations of falling prices. This is a critical sign that deflation is easing structurally, not just temporarily.

Services are labour-intensive, so rising consumption here often reflects higher wages, and stronger employment conditions At the same time, the economy is undergoing a gradual yet important shift away from its long-standing cash-heavy, deflation-era household behaviour towards more market-linked and risk-taking behaviour. Over the past three years, households have steadily reallocated assets toward equities and investment funds, supported by strong market performance, policy incentives such as the expansion of Nippon Individual Savings Accounts (NISA), and a changing inflation backdrop. While cash and deposits still account for roughly half of total household assets, the share of equities and mutual funds has risen meaningfully to around 22% in 2025 from 15% in 2022.

Despite these supportive factors, the transmission to consumption remains limited. Japan is only in the early stages of its transition toward equity ownership, and participation starts from a low base. So, recent wealth gains have been concentrated among higher-income households-primarily the top 10–20% who already have greater exposure to risk assets.

The structural shift toward higher wages and higher equity ownership should gradually support a recovery in consumption. However, the pace is likely to remain moderate, constrained by ageing households, which limit the transmission of wealth to spending. Japan is seeing a shift towards higher wages Source: CEIC "> Source: CEIC Japan is undergoing an important shift away from cash Source: CEIC "> Source: CEIC Australia: housing wealth supports consumption Australia presents a clear contrast to Japan in that household wealth is heavily concentrated in real estate rather than financial assets.

Around 55% of household wealth is tied to housing, a composition that has remained broadly stable over the past few decades. House prices have increased sharply - by more than 50% - since the COVID period, driven by a combination of strong demand and constrained supply. Population growth has been a key factor.

Immigration is running well above pre-pandemic levels, while housing supply has struggled to keep pace due to weak building approvals and persistent structural bottlenecks. Even in the face of higher interest rates, house prices have remained resilient and continued to trend upward. This has supported household balance sheets and consumption via housing wealth effects, though gains are uneven-non-homeowners face worsening affordability and rising rents.

A still-tight labour market has underpinned income growth. Looking ahead, our estimates suggest that real consumption growth in Australia is significantly more sensitive to house price movements than to wage growth. As such, consumption should accelerate in the second half of the year, supported by the lagged effects of strong house price appreciation through the first quarter of 2026.

In addition, persistently tight housing supply is likely to limit downside risks to house prices. This is helping sustain household wealth and reduce the risk of a sharp pullback in consumption. Australia - house price growth supports robust consumption Source: CEIC "> Source: CEIC Singapore: durable uplift in consumption Singapore is seeing a durable uplift in consumption, underpinned by structural tailwinds rather than cyclical factors.

Singapore is benefiting from two reinforcing trends. First, strong and sustained FDI inflows driven by its safe-haven appeal. Its role as a regional logistics and services hub, and relative tariff advantage, are supporting income growth and employment stability.

Second, Singapore is emerging as a key beneficiary of the AI investment cycle, given its world-class digital infrastructure, deep talent pool, and openness to innovation. These forces are translating into firm wage growth and strengthening household purchasing power. Importantly, this is now visible in consumption patterns.

Singapore is seeing a clear recovery in discretionary spending in 2026, with robust demand across categories such as leisure, electronics, and luxury goods. At the same time, tourism has rebounded strongly - now around 25% above pre-pandemic levels - providing an additional lift to retail, hospitality, and services consumption. These dynamics are not only strengthening the external sector but are also spilling over into domestic demand.

Labour market conditions remain supportive, with wages rising in Singapore. Singapore is benefitting from AI investments Source: CEIC "> Source: CEIC Middle of the pack: Malaysia – looking for new drivers Real consumption growth in Malaysia remains below its pre-Covid pace. First, housing wealth, previously a key driver of private consumption, has played a more muted role in recent years.

Second, while the slower pace of post-pandemic debt accumulation eased the incremental drag from new borrowing, elevated debt servicing burdens continue to weigh on consumption. Third, despite high labour force participation and low unemployment, wage growth has been persistently constrained by weak productivity and the concentration of jobs in lower value-added sectors. Yet there’s a growing tailwind.

The current wave of AI- and data centre-related investments is enabling a gradual shift toward higher value-added activities. This should support improvements in productivity and income over time. Malaysia is becoming more deeply embedded in the global AI value chain, particularly through its strength in semiconductor assembly and testing.

It continues to attract strong FDI inflows. In parallel, the country is emerging as a regional data centre hub, with large-scale infrastructure development, creating new employment opportunities. Together, these structural shifts should help underpin a gradual recovery in consumption.

Malaysia - despite low unemployment, wage growth is constrained by weak productivity Source: CEIC "> Source: CEIC The laggards: Indonesia and Philippines While low household debt is a structural tailwind, consumer spending in these economies remains primarily income-driven rather than credit-driven, making it more vulnerable to income volatility. Philippines - low productivity growth constraining consumption Structural constraints in the labour market are capping the upside for income-driven consumption. According to the World Bank, between 2010 and 2025, three out of four new jobs were created in non-tradable sectors, which tend to have lower productivity growth.

Export-oriented firms are around 20% more productive than non-exporters, yet the number of such firms has declined over the past decade. Though IT and business services outsourcing (BPO) grew, manufacturing stagnated due to real effective exchange rate appreciation, high energy costs, technology trends, and a challenging regulatory environment. This shift away from higher-productivity, export-oriented sectors toward lower value-added activities poses a structural constraint on income growth and, by extension, on the sustainability of consumption.

Consumption in the Philippines is closely tied to overseas remittances, which are predominantly used for day‑to‑day household spending rather than savings or investment. This structural reliance makes local demand heavily dependent on external income flows rather than domestic credit conditions. Recent data points to an emerging slowdown: Overseas remittance growth eased to around 2% year‑on‑year, with inflows falling to an 11‑month low of about $2.7 billion in April 2026.

This marks the weakest annual growth in nearly four years. With the Middle East accounting for roughly 17–18% of total remittance inflows, developments in the region are particularly important. Headline data doesn’t yet show a sharp contraction in remittances from the Middle East, but growth has moderated since February.

Month‑to‑month flows have become more uneven in early 2026, reflecting early-stage disruptions linked to the conflict. As such, the recent slowdown and rising volatility could exert a more persistent drag on inward remittances as conditions in the Middle East region take time to stabilise. Given the limited offset from alternative income sources, particularly for lower‑ and middle‑income households, any sustained weakening in remittance inflows is likely to weigh on private consumption with a lag.

This reinforces downside risks to domestic demand. Philippines - slowdown in remittances could impact consumption Source: CEIC "> Source: CEIC Indonesia - structurally constrained While headline consumption growth numbers in Indonesia suggest household demand remains relatively stable, high-frequency indicators tell a more nuanced story. Retail sales and consumer confidence have remained persistently soft, suggesting underlying weakness in spending dynamics.

This divergence reflects the structural nature of Indonesia’s consumption model. Consumption is heavily income-driven rather than credit-driven. Relatively low household leverage is limiting households' ability to smooth spending during periods of weak income growth.

Post‑Covid, Indonesia’s consumption dynamics remain constrained by weak income growth and limited household buffers. Despite headline GDP growth of around 5%, real wage growth has been modest at roughly 2%. This spotlights a disconnect between macro growth and household income gains.

It reflects a structural shift toward lower‑productivity sectors, with manufacturing’s share of GDP declining to roughly 18.7%, while employment has tilted toward informal and low-value-added services. Household balance sheets show signs of fragility. While the aggregate gross savings rate remains relatively high at around 35–37% of GDP, it masks significant distributional differences.

Micro‑level indicators point to weakening buffers. Average household savings per bank account have been declining, suggesting an erosion of per‑capita reserves. At the same time, Bank Indonesia survey data shows that the share of income allocated to savings rose to about 14.9% in December 2025.

The share spent on consumption edged down to around 74–75%, indicating rising precautionary behaviour rather than stronger financial positions. High‑frequency indicators reinforce this picture of subdued demand. Retail sales contracted by 3.7% YoY in April, marking the first decline in a year.

Consumer confidence, meanwhile, eased to around 120.9 in May from 123 previously. Monthly momentum has been volatile, with retail sales falling 11.6% MoM in April, underscoring weak discretionary spending. Taken together, these data points suggest that Indonesia’s consumption is being constrained not by a lack of aggregate savings but by weak income growth and thin buffers among lower‑ and middle‑income households.

The combination of modest real wage gains, declining per‑household savings, and rising precautionary saving points to cautious consumer behaviour. Indonesia: weak near-term outlook Source: CEIC "> Source: CEIC Conclusion In sum, Asia’s consumers are recovering, but the rebound is increasingly uneven. Structural factors - not just cyclical conditions - are driving a divergence, with income growth, savings buffers, and wealth composition shaping consumption outcomes.

This suggests the region is unlikely to see a synchronised consumption upswing, with laggards continuing to weigh on aggregate demand. Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.

Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Deepali Bhargava Regional Head of Research, Asia-Pacific Deepali Bhargava joined ING in 2024 and is Head of Research and Chief Economist Asia-Pacific. She has over 19 years of work experience as a macro specialist covering rates, FX and equity markets… In this article Asia consumption recovery: gradual but uneven Savings buffers: uneven trends across the region Japan: Wage-led recovery, wealth effects to build gradually Australia: housing wealth supports consumption Singapore: durable uplift in consumption Middle of the pack: Malaysia – looking for new drivers The laggards: Indonesia and Philippines Philippines - low productivity growth constraining consumption Indonesia - structurally constrained Conclusion