UBS On-Air · October 23, 2026 · 5 min

UBS On-Air: Paul Donovan Daily Audio 'Who cares about technology?'

Summary

Paul Donovan argues that recent volatility in AI-related technology stocks is not yet a macro concern for the US consumer, because wealth effects only shape the economy if they change spending behaviour, and developed-economy consumers have so far lowered savings rates to keep consuming through the 2026 oil shock. He notes that tech-linked wealth effects vary across economies, which suggests consumption is only weakly tied to them, though the volatility could still bite later. On Europe, he highlights UK growth as the fastest in the G7 year to date, pointing to resilient British Retail Consortium like-for-like sales, trend-positive real retail sales, a relatively good labour market, and strong youth leisure spending that official data may understate. He treats the weak GfK consumer confidence reading as a reflection of the news environment rather than of intentions to spend. On central banks, he says Japan's national CPI was in line with expectations, so markets should not react strongly, and that the Bank of Japan will probably raise rates but without much urgency and with no firm timing.

Key takeaways

Paul Donovan on US consumer: Tech-stock volatility will have limited effect on consumer spending, since wealth effects need changed behaviour.
Paul Donovan on Europe's economy: UK consumer spending is holding up despite the oil shock, with the UK the fastest-growing G7 economy.
Paul Donovan on Central banks outside the US: The Bank of Japan will likely raise rates but shows no real urgency about tightening.

What was said, by company and theme

3 views from 1 speaker. Every quote is checked against the episode's transcript (how).

US consumer

Paul Donovan · UBS Global Wealth Management
Tech-stock volatility will have limited effect on consumer spending, since wealth effects need changed behaviour.
Volatility in AI-related tech stocks is not yet a macro concern. Wealth effects only matter for the economy if they change behaviour. Developed-economy consumers have responded to 2026 in a similar way, lowering savings rates to pay for consumption, while technology-related wealth effects differ from economy to economy. That mismatch suggests consumption depends only weakly on these wealth effects. Donovan adds that the volatility may still have real-world effects later.
“Wealth effects require changed behaviour to make them relevant in economic terms... That disjuncture suggests only a limited dependence of consumption on those wealth effects.”at 0:41

Europe's economy

Paul Donovan · UBS Global Wealth Management
UK consumer spending is holding up despite the oil shock, with the UK the fastest-growing G7 economy.
UK growth is the fastest in the G7 year to date. The British Retail Consortium's like-for-like sales have been resilient, and real retail sales have trended moderately higher. Consumers are cutting high savings rates to absorb the higher prices from the oil shock, and a relatively good labour market provides modest positive spending power. Spending on leisure, which retail sales miss, is strong among younger people, who may surprise positively through side-hustle income hidden from official data. The weaker GfK consumer confidence figures reflect the news environment more than consumers' intention to spend.
“The UK is the fastest growing G7 economy year to date. Consumers have high savings rates that can and are being cut to absorb the higher prices arising from the oil shock”at 1:51

Central banks outside the US

Paul Donovan · UBS Global Wealth Management
The Bank of Japan will likely raise rates but shows no real urgency about tightening.
Japan's national consumer price inflation came in as expected, so markets are unlikely to react strongly. The Bank of Japan is likely to raise interest rates, but it does not seem to have any real sense of urgency about the tightening process. The support is thin and the timing is not given.
“The Bank of Japan is likely to raise interest rates, but it doesn't seem to have any real sense of urgency about the tightening process.”at 3:30

Topics

BoJ tightening
UK growth
wealth effects on consumption

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