BEIJING: Consumers in China and India will be essential to the health of the global economy over the next ten years, as increased spending levels in these countries during the next decade offset the declines experienced in more developed markets in North America and Europe, CIBC predicts.
CIBC's new report, entitled The Teenage Years: What the Coming Decade Holds, predicts that tighter credit restrictions will limit such outlay in the US, Canada and Europe, where, previously, spending levels "ran faster than income growth".
Overall, these countries require a reformulation of their economic models, taking on an approach more reminiscent of that adopted in China, which has focused on exports and capital spending.
Chinese consumers also have a savings rate that is "miles above the US level, allowing its household sector to accumulate huge annual savings.”
The savings rate in Europe and North America and Europe is set to rise by 3%, to 8%, over the next decade, resulting in a $600bn (€432bn; £376bn) drop off in spending.
However, improvements in living standards will "reduce precautionary savings" by 5% in markets like India and China, adding a total of $900bn to the global expendture rate.
A variety of trends should result in "improving the real purchasing power of consumers" in the Middle East and East Asia, CIBC predicts.
For example, economic growth and infrastructural development in India and China is likely to increase levels of confidence among shoppers that "their newfound wealth is not ephemeral, allowing them to reduce precautionary savings."
Overall, an increase in expenditure in these markets like China and India could thus ultimately "add far more to global consumption spending than will be lost" by slowing outlay elsewhere.
Data sourced from CIBC; additional content by WARC staff