[T.S.R:18278] Credit Suisse-Key Themes From 7 Emerging Markets

 

Key themes from the seven

emerging markets

We summarise our findings from our consumer survey into eight broad issues:

1) Confidence is high.

The survey as a whole reveals consumers in the emerging world

as relatively confident on their outlook for the year ahead, particularly in China and Brazil.

2) The shift towards discretionary spending continues.

Demand for essential items

after increasing rapidly tends to stagnate in favour of more discretionary items. Consistent

with this, we find the greatest proportion of spending planned on discretionary items

occurs in relatively rich markets (Saudi Arabia), while spending on essential items is a

major feature of poorer markets (India, Indonesia, Egypt).

3) Inequality of income.

Uneven income distribution across all these markets skews this

headline result on essential relative to discretionary spending on goods and services.

Combining data from the Credit Suisse Global Wealth report with data from our survey we

calculate the absolute and relative distribution of households that fit into comparable

income bands across each market. Given their sheer size, China and India. The number of

high income households in India earning greater than US$2,000 per month, for instance, is

more than twice that of Russia despite GDP per capita 80% lower than Russia.

4) Real income growth.

Our survey data reveals the detail behind the aggregates:

interestingly, we find that income disparities . that are already wide . are set to increase

as the high income brackets have seen, and are expected to continue to see, much

greater growth. Two broad conclusions: a) over the next year, absolute growth rates look

likely to be best supported at the discretionary end of spending; and b) essential goods

and services look set to achieve better

relative growth in Indonesia, China and Brazil.

5) International versus local brands.

In line with the transition from essential items

towards discretionary spending, the survey also shows there is a clear and consistent

pattern in consumption of branded goods as income levels improve. International brands

have the upper hand in the premium ratings (cars, perfume and fashion), for essentials

(such as bottled water and dairy products), the preference for international brands over

local brands is not particularly strong.

6) Public versus private: healthcare and education.

Aggregate average household

expenditure on healthcare and education is very different when compared across markets.

For example, household expenditure on healthcare in Brazil (9.8% of income) is nearly

twice that of China, at 5.7%. Demographics, public sector expenditure as well as social

and cultural influences help explain the differences. The survey shows that healthcare

spending intentions over the next 12 months are most positive for China, Brazil and

Russia.

7) Consumption map.

In order to draw together some of these different ideas and themes

we present the .Emerging Market Consumption Map. (see pages 10-17). This summarises

spending intentions across 14 different types of goods and services for different income

groups across the seven markets. The ongoing strength of demand and real income

growth in China sees healthy demand across the broadest basket of spending. Brazil also

sees a degree of breadth but the focus is towards the genuinely discretionary end.

8) Credit, savings and investment.

Finally, we consider some of the financial aspects of

changing consumption patterns. We note the substantial structural differences in the

savings culture across these markets. China and India both exhibit strong savings cultures,

Brazilian households prefer to spend rather than save. The outlook for credit growth

appears to be strong: plans for mortgage-backed property purchases are positive across

the board (particularly strong in Indonesia, China and Brazil) as are plans for creditfinanced

vehicle purchases (a notable feature in Saudi Arabia and Brazil).

 

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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