The Rise of Emerging Markets: The Changing Landscape of Global Economic Growth
The global economy is extremely uncertain and there is no denying that the near term outlook of the world economy is unpredictable. The global financial market is facing a number of challenges, including the failure of the European and US political systems in managing and dealing with their fiscal challenges and the growing concerns over a prospective hard landing in Beijing's economy.
The fortune of investors and the economic outlook have been enhanced by the harmonized and synchronized action between the central banks of the developed markets that are designed to ease the credit flow, positive economic news out of the United States and Beijing's adoption of an easier and accommodative monetary policy stance, in addition to the expectations of refurbished fiscal stimulus.
While the Americans have shifted their focus to savings and fixing their balance sheets, consumers in EM (emerging markets) have initiated an enormous spending spree that is stimulated by increased financial security, increasing income levels and confidence over their economic futures.
Furthermore, the US consumer no more drives the global economic growth. Consumers in the emerging markets in recent times are stepping in greater numbers onto the global economic stage. These consumers have been successful in making a notable impression on MNC's (Multi-national Corporations) that consider them as ‘easily reachable' in comparison to their frugal and thrifty counterparts in developed economies.
According to experts, rising living standards have led to a rapid increase in consumption in emerging markets. At a time when most developed nations have been leading in their spending, this domestic demand remained firm in the face of global economic turndown.
Experts believe that recent challenges will speed up the process of re-stabilizing emerging market economies towards increased dependence on consumer spending. The swelling size of the middle class in emerging markets and the ongoing urbanization in countries like India, China, Brazil and Russia is a significant driver for emerging consumer market spending. Consumers in these countries have the same aspirations as their counterparts in developed countries, such as luxuries, cars etc.
While the American consumer perhaps may still lead in terms of per capita and total spending, expansion in the US consumer spending and GDP is being overshadowed by the consumer spending and GDP growth in emerging markets, most noticeably Russia, India, China and Brazil.
Since the Great recession ended in the year 2009, consumer spending growth averaged 2.2%. In the meanwhile, consumer spending in China and India has surpassed 7% per year since the year 2006.
The above figure illustrates the transformation in consumption patterns to emerging markets. American consumption peaked approximately at 22% in the year 2002 and has steadily been declining since then. On the other hand, consumer spending habits in Europe reached approximately 18% of world GDP in the year 2004 and have been declining at the same pace since then.
This trend is predicted to continue. According to the prediction of econometric models, by the year 2015, the combined consumer spending in Europe and the US will contribute to 26% of World Gross Domestic Product that is significantly lower than 38.5% share in the year 2002.
In comparison to these figures, consumer spending in emerging markets (especially China, Russia, India and Brazil) accounted for approximately 8.1% of the world Gross Domestic Product in the year 2010 (compared to 4.4% during the period 1995-2000) and is expected to reach approximately 12 % by the year 2015.
To cut it short, with most of the Euro zone mudded in a recession and the recovery of the US from global recession taking place at an extremely slow pace, it is not much of a surprise that investors are rapidly turning to emerging markets to improve their portfolio returns.
It is not very difficult to understand the appeal. Emerging markets are composed largely of young and growing populations, and they now have an increasing amount of disposable income to spend. According to a projection, the number of middle class consumers in emerging markets may exceed the middle class population in the EU and US.
With this rise of the middle class in emerging markets, increased opportunities are available for consumer oriented foreign MNC's to boost their profitability and as more households enter the ranks of affluent middle class, status related spending may become more widespread and could further alter the composition of global consumer markets, thus changing the face of global economic growth.
Capital Trust Markets is an online Forex brokerage firm, headquartered in New Zealand. It was established in 2013, with an emphasis on providing the most excellent customer services in the industry. The trading environment offered to investors and traders is unparalleled - devoid of all common mistakes usually prevalent in the financial trading industry. The focused determination to provide the highest quality products, services, and support to clients and customers is what truly sets Capital Trust Markets apart from every other major brokerage firm.
The fortune of investors and the economic outlook have been enhanced by the harmonized and synchronized action between the central banks of the developed markets that are designed to ease the credit flow, positive economic news out of the United States and Beijing's adoption of an easier and accommodative monetary policy stance, in addition to the expectations of refurbished fiscal stimulus.
While the Americans have shifted their focus to savings and fixing their balance sheets, consumers in EM (emerging markets) have initiated an enormous spending spree that is stimulated by increased financial security, increasing income levels and confidence over their economic futures.
Furthermore, the US consumer no more drives the global economic growth. Consumers in the emerging markets in recent times are stepping in greater numbers onto the global economic stage. These consumers have been successful in making a notable impression on MNC's (Multi-national Corporations) that consider them as ‘easily reachable' in comparison to their frugal and thrifty counterparts in developed economies.
The Shift from Production to Consumption – The Changing Face of Global Economic Growth
According to experts, rising living standards have led to a rapid increase in consumption in emerging markets. At a time when most developed nations have been leading in their spending, this domestic demand remained firm in the face of global economic turndown.
Experts believe that recent challenges will speed up the process of re-stabilizing emerging market economies towards increased dependence on consumer spending. The swelling size of the middle class in emerging markets and the ongoing urbanization in countries like India, China, Brazil and Russia is a significant driver for emerging consumer market spending. Consumers in these countries have the same aspirations as their counterparts in developed countries, such as luxuries, cars etc.
While the American consumer perhaps may still lead in terms of per capita and total spending, expansion in the US consumer spending and GDP is being overshadowed by the consumer spending and GDP growth in emerging markets, most noticeably Russia, India, China and Brazil.
Since the Great recession ended in the year 2009, consumer spending growth averaged 2.2%. In the meanwhile, consumer spending in China and India has surpassed 7% per year since the year 2006.
The above figure illustrates the transformation in consumption patterns to emerging markets. American consumption peaked approximately at 22% in the year 2002 and has steadily been declining since then. On the other hand, consumer spending habits in Europe reached approximately 18% of world GDP in the year 2004 and have been declining at the same pace since then.
This trend is predicted to continue. According to the prediction of econometric models, by the year 2015, the combined consumer spending in Europe and the US will contribute to 26% of World Gross Domestic Product that is significantly lower than 38.5% share in the year 2002.
In comparison to these figures, consumer spending in emerging markets (especially China, Russia, India and Brazil) accounted for approximately 8.1% of the world Gross Domestic Product in the year 2010 (compared to 4.4% during the period 1995-2000) and is expected to reach approximately 12 % by the year 2015.
To cut it short, with most of the Euro zone mudded in a recession and the recovery of the US from global recession taking place at an extremely slow pace, it is not much of a surprise that investors are rapidly turning to emerging markets to improve their portfolio returns.
It is not very difficult to understand the appeal. Emerging markets are composed largely of young and growing populations, and they now have an increasing amount of disposable income to spend. According to a projection, the number of middle class consumers in emerging markets may exceed the middle class population in the EU and US.
With this rise of the middle class in emerging markets, increased opportunities are available for consumer oriented foreign MNC's to boost their profitability and as more households enter the ranks of affluent middle class, status related spending may become more widespread and could further alter the composition of global consumer markets, thus changing the face of global economic growth.
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Capital Trust Markets is an online Forex brokerage firm, headquartered in New Zealand. It was established in 2013, with an emphasis on providing the most excellent customer services in the industry. The trading environment offered to investors and traders is unparalleled - devoid of all common mistakes usually prevalent in the financial trading industry. The focused determination to provide the highest quality products, services, and support to clients and customers is what truly sets Capital Trust Markets apart from every other major brokerage firm.
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