Wanted: Non-U.S. Consumers

We all know about the housing bubble, the bad mortgages, etc. But on a more structural level, the growth in the world economy needs to modify. From about 2003-2007, American consumer spending generated global growth. Spending money they didn’t have. At one point, consumer spending was 130% (!) of disposable income.

In the after math of the Great Recession, it is clear that global growth needs to stop depending on the American consumer. Instead, consumers from other countries need to spend more and reduce their savings. The increasing middle class in emerging markets such as China, India and Brazil are new potential markets.

The American consumer now has a savings rate of approximately 6% compared to 1% in 2005. But the Chinese consumer saves more than 25% of their disposable income. For example, consumer spending as a percentage of Gross Domestic Product is:

  • 70%    United States
  • 56%    Germany
  • 40%    China

However, such a shift is easier said than done. There are cultural and structural differences in each country that need to be addressed before corporations can expand their markets to a new consumer.

The November 8, 2010 Wall Street Journal has an interesting article “As Global Economy Shifts, Companies Rethink, Retool.”  Three companies discuss the difficulties of trying to penetrate markets in Germany and China.

 http://online.wsj.com/article/SB10001424052748704049904575554290932153112.html

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