By Roger Thomas
If you listen to economists, you’d likely get the idea that retail sales are the most important driver of economic growth. It’s quite common to hear economist say something to the effect that over 70 percent of GDP growth stems from consumer spending. Thus, if consumers stop spending, the economy would enter a recession.
Ignoring for the moment the debate about whether retail sales is a follower or a leader in wealth creation and economic growth (it’s not, it’s a follower to productivity and investment), here’s a look at the global retail sales landscape since 2007.
Global Retail Sales Growth Since 2007
Perhaps somewhat surprising, the chart shows the massive domination of Chinese consumers when it comes to retail sales growth. Since 2007, retail sales denominated in yuan are up 183 percent, far surpassing second place Brazil at 148 percent.
China and Brazil are the only two countries to exhibit +100 percent retail sales growth since 2007.
In third place are Canadian consumers at 68 percent, followed by Russian consumers at 61 percent, and South Korean consumers at 46 percent.
On the other end, consumer in Spain are still 16 percent behind where they were in 2007.
In second to last place are Japanese consumers, up just 4 percent. No doubt the recent sales tax increase is putting downward pressure there. In third to last place is Mexico at 7 percent, followed by recently recession-plagued Italy at 7 percent, and Switzerland at 8 percent.
Interestingly, smack dab in the middle of the pack is the United States at 33 percent. Surrounding the U.S. as “boring” retail growth areas are consumers in Sweden, Norway, the U.K., Australia, Belgium, Germany, the Netherlands, and France.
Can BRICs Keep Up Their Growth Leadership?
Of the interesting aspects in looking at global retail sales is the massive dominance of the BRIC consumer. BRIC stands for Brazil, Russia, India, and China, the so-called important “emerging” economies.
(As a note, India is not included in the chart because retail sales for the country is not available in a timely manner. The same story holds true for other countries not included in the analysis.)
Can the BRICs continue to outpace western countries’ retail sales growth by such large margins?
If one listens to most analysts, the answer is probably yes, with the exception of Russian consumers. The growth will likely slow somewhat, but not enough to bring the BRICs down to EU or US territory.
Overall, consumers in China, India, Brazil, and Russia (although Russia has its own problems right now) have shown no signs of wanting to lessen their demand to become large-scale consumers.
Unless something happens with property values in China or there’s a global recession, it’s unlikely retail sales growth will slow very much in these emerging economies.
Overall, the global retail world continues to shift its attention towards consumers in China, Brazil, India, and other emerging market economies. Although some analysts doubt the sustainability of the emerging market consumer, every indication is that these emerging economies will continue to be the high growth areas for the foreseeable future.
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