财经观察 1584 --- How big is Asia?

Chart of the Week – How big is Asia?

As consumers across the West cut back on purchases, it’s tempting to believe that the world might be saved by a resilient Asian shopper (not this quarter perhaps, but ultimately). Over the past five years, in fact, private consumption spending in Asia ex Japan rose on average by 12.8% every year in nominal USD terms, well above the pace seen in the United States during the period (5.7%).

Can Asia offset the current slump in spending in the West? Not quite, but we are slowly getting there. Consider the below chart where we simply plotted the size of US consumption spending in nominal USD terms, which amounted to almost USD 10trn in 2007, against the equivalent number for Asia. A few observations stand out.

First, the US market is still considerably larger than Asia. But, private consumption in Asia ex Japan has risen rapidly as share of US household spending from less than 19% in 1990 to over 37% last year.

Second, even though Asian consumption is still smaller than US spending in absolute terms, incrementally it is beginning to have an impact. Consider the following: if US household spending contracts by, say, 2% next year, this would shave about USD 200bn off American expenditure. But, if Asian spending expands about 5% in nominal terms, which is a reasonable assumption as well, than this would add roughly USD 180bn to total household purchases, almost offsetting the US decline.

Third – and here comes the bad news – global private consumption spending is still bound to decline. The main reason here is that we still need to account for Europe and Japan. A 2% decline in Europe and a 1% decline in Japan, would reduce household spending by about USD 140bn and USD 25bn, respectively. Ignoring other parts of the world for a moment, our simple calculation suggests that global spending may fall by some USD 185bn (though don’t take these numbers too literally).

Bottom line: Asian shoppers are indeed growing more important, but they still have insufficient muscle to carry the world. Our calculations, evidently, are subject to all sorts of caveats and minor changes in assumptions change the picture quite radically. But, they do provide a little perspective on the rising importance of the Asian consumer.