Consumers Play a $43 Trillion Role in the Global Economy
Here’s a first: By 2025, 4.2 billion people out of a global population of 7.9 billion will be part of the consuming class.
That means, for the first time in history, the number of people with discretionary income will exceed the number still struggling to meet basic needs — a phenomenon that may well be the biggest opportunity in the history of capitalism.
From the United States to China, consumer spending, long a driver of the global economy, is undergoing sweeping change. Whether it’s millennials in the U.S. or families in India, a shift in the way people spend money is underway globally.
In 2015, Americans spent more than $11 trillion, accounting for two-thirds of the nation’s gross domestic product. But the way Americans spend money is changing. Since 2000, there has been a rotation in spending away from goods and towards services, especially travel and leisure.
That dynamic may also be at work in China, as the country continues on the path to having the world’s largest consumer economy. Consumers there are starting to spend less money on necessities and more money on activities such as family trips and going to the movies.
Demographics will have a major impact on the future of the global economy, particularly due to the aging of millennials, who were born from 1980 to 2000. There are about 80 million in the U.S., but most of the world’s 2 billion millennials are living in emerging markets. In Brazil, India and China, they outnumber baby boomers.
Globally, millennials are estimated to have a combined spending power of nearly $2.5 trillion. They are about to reach their prime working and spending years, and their impact on the world’s economy could be huge.
Here’s a look at some of the ways people are spending money globally, and what it may mean for investors.
In China, Shopping is About the Experience
Chinese Consumers Are Expected to Spend $3.6 Trillion This Year
Never underestimate the power of the Chinese consumer. Complex and unpredictable, the 1 billion consumers in China are not exactly clinging to their yuan.
Despite a relatively sluggish economy, the Chinese are projected to spend $3.6 trillion this year, or double what they spent in 2006. They are also expected to increase their spending by 10% a year through the end of the decade. They are not just filling the basket with consumer staples — for some, shopping is about the experience.