Section 4 Sophistication of consumption 1. Income per capita

Similar documents
Chapter 3 Emergence of new sources for growth Section 1 Rise of the services industry and expansion of services trade

THE MATURITY OF EMERGING ECONOMIES AND NEW DEVELOPMENTS IN THE GLOBAL ECONOMY

Figure I Economy growth rate by income group. Real GDP growth rate (annual rate) Average from 2003 to 2013

Yen and Yuan RIETI, Tokyo

Developing Affluence The emerging market consumer opportunity

Why is the Wage Growth Slow?

INCOME AND EXPENDITURE: PHILIPPINES. Euromonitor International March 2015

World Economic Trend, Autumn 2006, No. 10 Published on November 27 by the Cabinet Office

China as an investment destination

Economic Education Lecture. Emerging Giants: Perspectives on India and China. February 7, 2013

Developing futures to mitigates risks as China's economy shifts gear

CONSUMPTION TRENDS AN ECONOMIC ANALYSIS OF ASIA S CHANGING TRADE. Brian Jackson, Senior Economist,

COMCEC STRATEGY. For Building an Interdependent Islamic World. COMCEC Trade OUTLOOK 2014

Glenn Stevens: America, Australia, Asia and the world economy

A. Adding the monetary value of all final goods and services produced during a given period of

Yen and Yuan. The Impact of Exchange Rate Fluctuations on the Asian Economies. C. H. Kwan RIETI

JAPAN S ECONOMIC OUTLOOK

The Chinese Gold Market Past, Present & Future

The Medium to Long-Term Economic Outlook for Asia

Growth of European Network of Chinese Banks

ANNOUNCEMENT OF FINANCIAL RESULTS

Figure I Changes in real GDP growth rates in major Middle East countries

Annual Report on the Japanese Economy and Public Finance 2007

April 9, 2015 Consolidated Earnings Report for the Fiscal Year Ended February 28, 2015(Japanese GAAP)

JAPANESE ECONOMY Three factors behind the bleak economic outlook US ECONOMY Manufacturing production is slowing... 3

DIVERGING BRIC ECONOMIES

Stable economy sets the stage for reforms in 2018

September Moving forward. Opportunities in emerging markets

Charts. Chart 13: Various Consumer Price Indices Chart 14: Factors Affecting Long-Term Interest Rates Chart 15: Economic Activity in Oita Prefecture

Consumption Growth: Investing in Today s Emerging Markets

Japan s Economic Recovery from the Disaster. Taiji Furusawa (Hitotsubashi University and Harvard University)

2. Supply trend and final demand

Section 5 Promotion of internal globalization 1. Significance of inward foreign investment in Japan

Recent Economic Developments

World Economic Trend, Autumn 2004, No. 6

Vietnam. HSBC Global Connections Report. October 2013

Japan's Economy and Monetary Policy

inventory adjustments in IT-related goods and the impact of the terrorist attacks in the U.S.

NIELSEN: HONG KONG EXPERIENCES HIGHEST RISE IN CONSUMER CONFIDENCE AMONG 29 COUNTRIES SURVEYED IN THE FOURTH QUARTER

Nauru. Key Indicators for Asia and the Pacific Item

Results of the 77th Opinion Survey on the General Public's Views and Behavior (March 2019 Survey)

TAPPING THE GROWTH OPPORTUNITY OF EMERGING MARKETS

Swiss exports to China at record high, spurring confidence

Making growth work for the poor

JETRO s activities Promoting Inward Foreign Direct Investment

Korean Economic Trend and Economic Partnership between Korea and China

1 Defense-Related Expenditures and Changes

Consumption Growth: Investing in Today s Emerging Markets

Our world is changing. Take advantage by being... Where opportunity knocks.

Household Budget Survey

Unprecedented Change. Investment opportunities in an ageing world JUNE 2010 FOR PROFESSIONAL ADVISERS ONLY

Demographic shifts within each country will affect the development of consumer trends in each.

Invesco Fixed Income Investment Insights China green bonds: A sustainable asset class

Consolidated Financial Results

Summary of Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2008 (U.S. GAAP)

New China: Impact of the Chinese Consumer

Frankfurt am Main 25 November Capital Markets Outlook 2016: Broad diversification key to stable portfolios

POST-CRISIS GLOBAL REBALANCING CONFERENCE ON GLOBALIZATION AND THE LAW OF THE SEA WASHINGTON DC, DEC 1-3, Barry Bosworth

ASIA MONTHLY. November 2013

Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2006

REVOLUTIONIZE YOUR PORTFOLIO. Capitalizing on GL BAL. Trends

Chapter 6 ECONOMIC GROWTH. World Economic Growth. In this chapter-

The Government Deficit and the Financial Crisis

Understanding the Global ASEAN Consumer

SIP Aggressive Portfolio

INCOME, EXPENDITURE AND CONSUMPTION OF HOUSEHOLDS IN 2017

Banking NOVEMBER For updated information, please visit

3. Chinese economy shifts emphasis to expansion of domestic demand

HSBC PRIVATE BANK 2017 INVESTMENT OUTLOOK: GO WEST OR EAST. Bond Yield to Come Down, Focus on Growth Opportunities in the US & Asia

2017 Mid-Year Commercial Real Estate Outlook for Asia Pacific

Korea s Recent Economic Trends

Challenges to China s Consumption-led Growth

Ontario Economic Accounts

Long-term sustained growth of the cosmetics market. Ability to grow sustainably faster than the market

No Buds for Growth Found in the Japanese Economy

Taking stock of China s equity markets

Impact of the Global Investment Slowdown on the Korean Economy

Masaaki Shirakawa: The transition from high growth to stable growth Japan s experience and implications for emerging economies

Japan-EU EPA. Others, 32.0% EU, 21.8% U.S., China, 24.7% 14.9% GDP (2016, $ billion)

Finance Macroeconomic Analysis Midterm #1 Summer 2013

WHY INVEST IN INDIA. The India Growth Story

Summary of Consolidated Financial Statements for the Fiscal Year Ended December 31, 2018 (IFRS)

Vietnam Looking Forward

ANNOUNCEMENT OF FINANCIAL RESULTS

An outlook for key emerging Asian markets

Japan growing with Asia's development - Asia-Pacific framework toward

INCOME, EXPENDITURE AND CONSUMPTION OF HOUSEHOLDS IN 2016

Calamos Evolving World Growth Fund

Webinar: Credit crunch China and forward guidance in the UK why does it matter?

HOUSEHOLD EXPENDITURE IN MALTA AND THE RPI INFLATION BASKET

Update on China: Opportunities and Challenges Facing the World s Greatest Growth Story

Consolidated Financial Report for the Second Quarter of the Fiscal Year Ending March 31, 2018 <Japanese GAAP>

Monthly Report of Prospects for Japan's Economy

Pacific High-level Policy Dialogue on The Role of Macroeconomic Policy and Energy Security in supporting Sustainable Development in the Pacific

Investment in the Chinese equity

NEWS RELEASE Survey on Private Real Estate Funds in Japan January 2017 Results March 27, 2017 Sumitomo Mitsui Trust Research Institute Co.

The Case for the Emerging Markets Consumer and Their Impact on Pension Investments. October 2013

YEREVAN 2014 MACROECONOMIC OVERVIEW OF ARMENIA

Q Earnings Conference Call. May 22, 2017

GLOBAL INSURANCE MARKETS SELECTED DATA

Transcription:

Section 4 Sophistication of consumption Against the backdrop of rapid economic growth, the sophistication of consumption is advancing in emerging economies. Below, we will first look at changes in consumption expenditure per capita in emerging economies and then describe the sophistication of consumption there. 1. Income per capita As for changes in income per capita (real GDP per capita on a purchasing parity basis), income per capita surpassed 5,000 dollars, a level above which more than half of disposable income may be used for discretionary expenditure, in upper-middle-income economies in the 1980s and is expected to reach 15,000 dollars there in 2015 (Figure I-2-4-1-1). In lower-middle-income economies, income per capita surpassed 5,000 dollars in 2012. Meanwhile, in low-income economies, as the growth in income per capita has been slow, the income level is expected to be less than 2,000 dollars in 2015. It is generally presumed that when annual disposable income is higher than 5,000 dollars, half of the income can be used for expenditure on items other than foodstuff (discretionary expenditure). According to the Ministry of Economy, Trade and Industry (2012), when households disposable income has surpassed 5,000 dollars, the ownership rate of various household appliances, such as washing machines and refrigerators, rises rapidly. When households disposable income has reached the range of 7,000 to 10,000 dollars, consumption expenditure on various services, including dining-out, education and leisure activities, rises rapidly, and when it has surpassed 12,000 dollars, expenditure in the healthcare sector increases (Figure I-2-4-1-2). It is generally presumed that for Japanese companies that excel in high-quality, high-function products, regions where higher-income groups of people are increasing are more attractive as markets. 77

Figure I-2-4-1-1 Changes in real GDP per capita (Dollars) Real GDP per capita Half of the income can be used for discretionary expenditure 5,000 dollars Figure I-2-4-1-2 Consumption expenditure by income group Note: On a purchasing parity basis. Simple average of the countries and regions that constitute each ecomic group. Figures after 2014 for some of the countries include estimated values. Source: World Economic Outlook (IMF). [Household income: $70, 000 or more] Average household income in Japan in 2010 70,000 dollars [Household income: $12,000 or more] - Expenditure in the healthcare sector increases. Upper-middle-income groups 10,000 dollars [Household income: $7,000 to $10,000] - Consumption expenditure on various services, including dining-out, education and leisure activities, rises rapidly. - Consumption expenditure on luxury items, such as interior accessories, rises rapidly. - Ownership rate of new cars rises rapidly. [Household income: $5, 000 or more] - Ownership rate of various household appliances, such as washing machines and refrigerators, rises rapidly. * Income level in Japan in the first half of the 1960s Lower-middle-income groups 5,000 dollars Source: Shin chukansou kakutoku senryaku - Asia wo chushin to shita shinkokoku to tomoni seichosuru Nippon (METI). 78

2. Consumption expenditure In upper-middle-income economies, consumption expenditure has increased steeply since the latter half of the 2000s, when income per capita started to rise (Figure I-2-4-2-1). Consequently, expenditure in 2013 nearly quadrupled from 2000 to approximately 9 trillion dollars. In lower-middle-income economies, consumption expenditure in 2013 quadrupled from 2000 to 3.4 trillion dollars. On the other hand, in low-income economies, the growth in consumption expenditure has been slow. (Trillion dollars) Figure I-2-4-2-1 Changes in consumption expenditures Source: WDI (World Bank). 3. Diversification and sophistication of consumption In line with the rise in the income level, consumption in emerging economies is expected to become more diversified and sophisticated than before. Discretionary expenditure, or expenditure on non-necessity items, including transport and communication, recreation and education and medical and health care, is expected to grow. Consequently, demand for various goods and services is expected to grow in emerging economies. For example, if we look at changes in the number of subscribers for mobile phones, a service that is most emblematic of the economic globalization, we can see that the subscriber numbers in upper-middle income economies and lower-middle-income economies have continued to rise steeply in the 2000s and have surpassed the subscriber number in high-income economies in 2008 and 2010, respectively (Figure I-2-4-3-1). 79

(100 million people) Figure I-2-4-3-1 Changes in the number of mobile phone subscribers High-income economies Source: WDI (World Bank). The number of Internet users has also continued to rise. In emerging economies, the number of Internet users started to rise around 2000, and in 2013, one in two persons were using the Internet in upper-middle-income economies and one in five persons were using it in lower-middle-income economies (Figure I-2-4-3-2). 80

Figure I-2-4-3-2 Changes in the number of Internet users per 100 people (Number of users per 100 people) Source: WDI (World Bank). In the meantime, imports of consumer goods by emerging economies have also been increasing steeply (Figure I-2-4-3-3). The value of consumer goods imports by upper-middle-income economies reached 445.0 billion dollars in 2012. Including imports by lower-middle-income economies, the value of consumer goods imports by middle-income economies totaled nearly 600 billion dollars, equivalent to around 20% of the value of imports by high-income countries in 2012, which was 2,800 billion dollars. 81

(Billion dollars) Figure I-2-4-3-3 Changes in the value of consumer goods imports Source: UN Comtrade (United Nations). If we look at the value of imports of information and communication equipment 13 by emerging economies as an indicator of the degree of the penetration of IT there, we can see that the value has risen steeply in upper-middle-income economies since 2000 to a level far above the levels in lower-middle-income economies and low-income economies (Figure I-2-4-3-4). 13 It should be noted that the import value of information and communication equipment here represents the total of the import values of such equipment classified as consumer goods and of equipment classified as capital goods. 82

Figure I-2-4-3-4 Changes in the value of imports of information and communication (Billion dollars) equipment Notes: Data shows the results of calculation by multiplying the share of information communication equipment in goods imports of countries by their goods imports values, only targeting the countries providing data on all given years. Source: WDI (World Bank). As shown above, the consumption trend concerning consumer goods and services in emerging economies appears to be rapidly becoming closer to the trend in high-income economies. However, a comparison between emerging economies and high-income economies in terms of the breakdown of actual consumption expenditure shows that there are still significant differences between the two groups. Figure I-2-4-3-5 shows a comparison between the Chinese city of Shanghai, which is the largest city in the world, and Tokyo in terms of the breakdown of consumption expenditure. This indicates that compared with Tokyo, Shanghai lags in the diversification of the consumption structure. There is a particularly large difference between Shanghai and Tokyo with regard to other goods and services, an item which mainly comprises discretionary expenditure products such as beauty products and personal goods. The figure shows that in Tokyo, other goods and services is the second largest expenditure item after foods, while in Shanghai, this item s share in overall expenditures is very small. An increase in expenditure on other goods and services, as well as an increase in expenditure on cultural activities, would mean diversification of consumption. It may be said that there is still ample room for further sophistication of consumption even in Shanghai, where consumption is supposed to have become as sophisticated as in high-income economies. 83

Figure I-2-4-3-5 Comparison of breakdown of consumption expenditures between Shanghai, China, and Tokyo, Japan, in 2013 Clothing Food Household equipment, services Transportation, communication Medical and health care Education, leisure and cultural activities Other goods and services Shanghai, China Tokyo, Japan Notes: 1. As for Tokyo, figures show the consumption expenditures in the Tokyo Metropolitan Area. 2. Other goods and services include beauty products, personal goods, tobacco, entertainment expenses and remittances. Source: Kakei Chosa (MIC), JETRO website. 84