Comparing Consumer Wealth Levels

In this time of sluggish global economic growth, consumer spending has emerged as an ever-more-important segment of the global economy and the key driver for economic growth in most of the world’s leading economies.  For example, consumer spending accounts for between 50% to 70% of GDP in nearly all of the world’s largest economies (with the notable exception of China).  Just one generation ago, most of the world’s consumer spending was centered in just two dozen developed economies in North America, West Europe and East Asia.  However, the rapid economic growth achieved in many of the world’s largest emerging markets over the past 30 years has resulted in a tremendous increase in consumer spending levels in emerging markets and it is these markets that are providing much of the growth for consumer goods and services around the world.  Furthermore, in a time of global economic uncertainty, consumer spending will remain the key component of economic growth in the coming years. 

While emerging markets are providing much of the growth in consumer spending around the world, developed economies such as the United States, Europe and Japan continue to account for a large percentage of overall global consumer spending.  The world’s most important consumer market remains the United States, thanks to its large single market and disposable income levels that are well ahead of all other large developed economies.  With the US dollar forecast to remain strong in the coming years, US consumer spending will remain a key driver of global economic growth in the years ahead. 

Europe also has a large consumer market, but the region’s key growth markets have all experienced turbulent times in recent years.  Nevertheless, Europe will remain the world’s second-leading consumer market for many years to come.  Other developed economies such as Australia, Canada and South Korea will also continue to provide growth markets for consumer goods and services, thanks to relatively high disposable income levels.  In contrast, Japan’s consumer market will continue to decline, due to shrinking consuming-age populations and stagnant disposable income levels. 

Despite decades of higher-than-global-average growth, emerging consumer markets still trail their developed counterparts by a wide margin when it comes to scale and spending power.  Nevertheless, in some parts of the world, the gap between the market potential of consumer markets in emerging markets and their developed market counterparts has narrowed substantially, particularly in Asia.  No emerging consumer market is more important than China, and with consumer spending levels continuing to rise by more than 10% per year, China will remain the leading growth market for a wide variety of consumer goods and services for many years to come.  India also holds the potential for major consumer spending growth in the coming years, if the forecast 8%-per-year economic growth for India can stimulate growth in the country’s vast consumer market. 

Outside of Asia, there had been hope for substantial consumer spending growth in emerging markets such as Brazil, Mexico and Russia, but these countries recent economic woes have had a major negative impact on the consumer markets in each of these countries.  Overall, emerging markets will continue to outgrow their developed market counterparts, but the disparity in purchasing power between consumers in these two classes of markets will remain sizeable for the long time to come, particularly outside of Asia.

Thanks to higher purchasing power levels and a slightly improved economic outlook, developed economies will remain the key markets for most consumer goods and services over the near-term.  Nevertheless, consumer spending growth levels in most developed economies has been slow over the past decade and some key developed consumer markets will remain sluggish as consumer-age populations stagnate or decline in many of these countries.  As for emerging markets, Asia will be the center of growth, thanks to strong consumer spending increases in China, India and Southeast Asia, and this will have a massive influence on the development and marketing of consumer goods and services in the coming years.  Outside of Asia, the stunted development of middle classes in Latin America, Africa and the Middle East will hold back consumer spending growth until economic growth rates in these markets is able to return to the highs they achieved in previous years. 

Regardless of these discrepancies in different markets, overall consumer spending will play an increasingly-important role in driving growth for the global economy in the years ahead and the health of the consumer market will be the key factor in determining the performance of the global economy for the foreseeable future.