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