‘The consumer of 2020’ and other great reads

The consumer of 2020

A very interesting report was released today by Deloitte:  Consumer 2020- Reading the Signs

It’s well worth the read as it highlights many of the concerns I see in most Western countries namely demographics and the decline of the consumer society.  It’s disappointing that they didn’t include Canada in their analysis, as our situation is not remarkably different from that of the US and UK when one looks at our present and future demographic issues and our reliance on consumer spending to fuel illusory economic growth.  If nothing else, just read the section titled, “Setting the Stage” on page 3 and consider the applications to Canada’s current model of economic growth.

Here are some screen shots of the important quotes:

Let me remind my readers that consumer spending as a percentage of GDP has increased from its long-term average closer to 55% to the current 65% while household balance sheets look like this:

Back to the report:

With the coming ‘Silver Tsunami’ of boomer retirees set to realize that they are woefully unprepared for retirement, expect demographics to exert strong pressure on consumption.

The rest of the report is certainly worth reading.  It delves into food price appreciation, which will no doubt be a feature of the next decade, the role of emerging markets in the economy of the next decade, and other interesting topics.

Other great reads

Three other articles also caught my eye today and merit your attention.

1)  Britain battles inflation amid tepid growth

This is the nightmare for most developed Western nations as they face imploding credit bubbles and the ravages on deflation.  If inflation in commodities continues, it will no doubt result in a significant reduction in the standard of living of the population, particularly as austerity and higher taxes are all but assured.  For more on the nightmare paradox of commodity inflation amid strong monetary deflation, check out these two posts.

2)  US home price declines exceed Great Depression

The title is as shocking as it is self explanatory.  Enough said.

3)  Rapid interest rates expected in China

I’ve written at length about the role China has had in stimulating our economy via excess liquidity in the global market and massive stimulus measures that have gobbled up our commodity exports.

The bottom line is that strong moves by the People’s Bank of China to mop up excess liquidity is certainly a concern for commodity markets….and that’s an understatement.  A hard landing in China would have far-reaching implications for the fragile global economy.  Consider China’s need to rein in inflation and Europe’s debt crisis as the top two global macro stories to be watching this year.

Cheers

Ben

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2 Responses to ‘The consumer of 2020’ and other great reads

  1. John in Ottawa says:

    The Deloitte article is interesting, but I’m surprised they did not discuss the energy needs to support their growing middle class projections.

    Deloitte projects a significant increase in the world’s middle class, however the middle class are huge consumers of energy. For example, it takes 9 calories of fossil fuel energy to produce 1 calorie of food energy. No agency, EIA or IEA, is predicting significant increases in available energy between now and 2035 and, in fact, rely on “yet to be discovered or developed” sources of energy just to maintain the status quo in the short term and to provide about 80% of energy supplies in 2035. That’s a lot of “hail Mary.”

    Even if we accept that “yet to be discovered or developed” energy sources can supply the net 5% increase in available energy supplies projected by the IEA over the next 25 years, it strikes me as very incomplete for Deloitte not to have talked about the cost of that energy and it’s implications for their projections. Given Deloitte’s predictions, what will be the demand side of the energy equation? I suggest it must be greater than a 5% increase.

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