What does a "stable economy" mean

By John Merolla

Reporter, Life News Today

Many times, we talk about a "stable" economy when the major indicators stop showing great changes. Prices are no longer rising at the pace of recent peaks, employment is not collapsing, and financial markets appear calmer. In this context, headlines and discourse tend to agree that the economy "holds up". However, when you look at how households experience this stability, the picture is usually more complex. Stability, understood from everyday experience, is not measured only by national averages, but by the real margin that people have to sustain their lives without being exposed to any unforeseen event.

From a macroeconomic point of view, the idea of stability is usually based on a specific process: the slowdown in inflation. After the strong rebound in prices that followed the pandemic and global disruptions, international organizations have indicated a gradual downward trend. The International Monetary Fund projected that global inflation, which reached 6.8% in 2023, would fall to 5.9% in 2024 and around 4.5% in 2025, reflecting a broad-based, albeit uneven, cooling across regions. The World Bank, in the same vein, anticipated that global inflation would continue to moderate in 2026, approaching levels more compatible with price stability in the long term. These data support the idea that, in aggregate terms, the period of accelerated increases is behind us. But just because inflation goes down doesn't mean prices will return to previous levels. It simply means that they rise slower.

For households, that difference is key. After several years of cumulative increases, many essential goods and services were left on a higher price base. Food, transportation, energy, insurance, and basic services continue to absorb a significant portion of monthly income. In that context, lower inflation may feel less like relief and more like stabilization at a high level, where the budget remains tight. The home is usually the point where this distance between the macro and the everyday becomes most evident. In many economies, both developed and emerging, the cost of renting or buying a home has grown faster than income in recent years. When housing takes an increasing proportion of income, the margin for other expenses is reduced, and stability is no longer an abstract matter.

Various international studies agree that the sustained increase in housing costs is one of the main factors that pressure family budgets, even in countries where general inflation has moderated. The cost of credit also influences how this stability is experienced. In a global environment where interest rates rose to contain inflation, financing daily or long-term expenses became more expensive. The World Bank has noted that while financial conditions may ease gradually, this process will be uneven and slow. For many households, this means that access to credit remains expensive, limiting the ability to smooth consumption in the face of variable income or unexpected expenses. The economy can continue to function in aggregate terms, but with budgets that are more sensitive to any shock. Work is another central axis in this discussion. Globally, employment indicators do not show a generalized collapse. The International Labour Organization (ILO) has highlighted that, although global economic growth moderated, employment remained relatively resilient in many regions. However, that resilience does not always translate into economic security for workers. The ILO has also pointed out that real wage growth returned to positive territory globally after the inflationary impact, but with large differences between countries and sectors.

In some cases, wage increases barely offset the cost of living; in others, they lag behind. Having a job, then, does not automatically guarantee financial stability. This difference between employment and security is reflected in adaptation strategies that appear in different countries: households that combine multiple sources of income, informal jobs or constant adjustments in consumption to make ends meet. These dynamics are not always seen in the major indicators, but they are part of the daily experience of millions of people. From a macro perspective, the labor market may look "stable"; From a micro perspective, that stability can feel fragile. Health is, in many contexts, the factor that most clearly exposes this fragility. Even in systems with some form of coverage, the out-of-pocket costs associated with health care can be significant.

The World Health Organization (WHO) has warned that "catastrophic" health spending remains a major problem, even in developed regions. In Europe, for example, the WHO has noted that up to one in five households faces severe financial hardship from health care costs. The Organization for Economic Cooperation and Development (OECD) has also documented that out-of-pocket health expenditures represent a significant proportion of household consumption and that this burden varies widely between countries.

These data show that economic stability does not depend only on inflation or employment, but also on the ability to absorb unexpected expenses without compromising long-term well-being. When these elements are observed together, a pattern appears that is repeated in different countries. The economy may show signs of stability in national averages while a significant part of households operate with very narrow margins. Inflation is down, but prices remain high. Employment is maintained, but income is not always enough. Credit exists, but it is expensive. Protection systems work, but they do not eliminate financial risk in the event of unforeseen events.

Therefore, talking about "economic stability" requires specifying from what level it is observed. For markets and macro indicators, stability usually means lower volatility and more predictable expectations. For households, it usually means something more concrete: being able to plan, sustain basic expenses and face an emergency without the entire budget being disrupted. As long as those two dimensions don't align more broadly, the economy can look stable on the charts while also feeling tight in the daily lives of millions of people.