In the pre-crisis period, the ratio of household consumption to real GDP growth was 6.18% in transitional (developing) markets, compared with 2.55% in developed, and 3.24% in emerging markets.
In other words, in emerging markets, 1% of real GDP growth induced 3.24% growth in household consumption.2
In the wake of the financial crisis that began in 2008, it is clear that none of the key drivers of private household consumption—the true growth engine in the global economy—is working properly. Those three are employment growth, increases in real wages, and an expansion of consumer credit. This situation is generally true in each of the three broad groups of global markets—developed, transitional (developing), and emerging. The key to understanding the problem is in the great predominance of consumer spending in developed markets as compared with the other two. It is therefore of the greatest importance to ask where we can expect growth in the global economy over the next five years. Getting consumer markets right in terms of where and how growth will come from, and its implications on business innovations and technology, will be crucial to their future success.
1. MasterCard estimates based on data from CEIC, Eurostat.