At the beginning of 2015, the Economies and Consumers team published our collective expert predictions for the year ahead. With 2015 rapidly drawing to a close, it’s time to revisit them to see if they proved correct. Below are the trends, with commentary from our team on how these have developed throughout the year. Look out for our 2016 predictions, coming early in January.
• A greater number of countries will see rising income inequality in 2015.
True – In 2015, 51 countries saw rising income inequality, compared to 49 in 2014.
• China’s consumer spending growth is set to slow in 2015, despite the government’s efforts to promote a consumer-led economy.
True – In 2015, China’s real consumer spending grew by 7.8%, down from 8.8% in 2014. The ‘I’ve gotta have it now’ spending frenzy appears to be over. But other factors, including economic uncertainty and the recent stock market crisis certainly also played important roles in declining consumer confidence.
• Nevertheless, Chinese consumers will reach a new level of sophistication and maturity, increasingly selecting products that satisfy their individual needs rather than simply ‘keeping up with the Wangs’.
Although brands still drive demand for a large proportion of Chinese shoppers, it appears that consumer taste is maturing, consumers are more willing now to consider lower-priced, unbranded products — as long as they still exude quality.
• In the US, tech-savvy Hispennials (Hispanic Millennials) are set to become the market’s most active and influential digital consumers.
There has been no slowing Hispanic Millennials as they continued to over-perform in terms of adoption of digital technology, particularly mobile technology.
• Consumers will show themselves more willing to spend on convenience.
This has been a major ongoing trend among consumers, especially in recovering developed markets who continue to pay for convenience. However many consumers in BRIC countries, Russia and Brazil in particular, and some other developing countries, are having to trim their keenness in buying convenience, as they are having to be much more frugal.
• As a response to increasing consumer concern about safeguarding privacy, a greater number of brands will offer privacy as a key selling point.
Definitely, more brands are offering privacy as a key selling point. The interesting shift here, though, is that some consumers are more relaxed about letting brands use information about their past searches and purchases, for instance, if it enables consumers to save time.
• Multi-nationals’ interest in Cuba as a consumer market will increase.
True: Interest is clearly rising in Cuba but it is too soon to see the direct impact on investment in the country. Some are adopting a “wait and see” approach, others are researching the market. The UK government sent a Trade and Investment Mission to Cuba in April and the U.S. Chamber of Commerce delegation, including representatives of Amway, Boeing, Caterpillar and American Airlines arrived in November. The US states of New York, Texas and Arkansas have also arranged similar delegations.
• Prices for key commodities are expected to remain weak through much of 2015, creating unprecedented challenges for countries reliant on commodity exports.
True, prices for commodities remained weak during the year
• The oil price in particular is likely to remain low by recent standards but will trend upwards from its current position.
Partially true: The oil price has remained low and did trend upwards for the first half of the year. However, since its 2015 peak in May it has once more returned to a downwards path, driven by OPEC’s decision to maintain output for the rest of the year, the Iran nuclear deal and worries over the potential Greek exit from the eurozone.
• Mobile Internet users will become more important as consumers than desktop users.
True: there are far more mobile Internet users, more smartphone users, and bigger m-commerce markets
• Weak oil prices will put pressure on the cost-effectiveness of renewables and fracking.
Partially true: Oil prices are putting pressure on the expansion of shale development. However government policy continues to drive growth in the sector. Cost savings have also been made in renewables improving their competitiveness against fossil fuels.
• The Chinese economy will avoid a hard-landing.
True: China has continued to slow in 2015, with real GDP growth currently expected to come in at 6.7% for the year, but has so far avoided a hard-landing. Rather than a hard landing we are seeing what has been termed a “new normal” of lower growth.
• Wages in China will rise significantly in real terms.
True, wages are on the rise in real terms as the Chinese economy shifts towards tertiary industries. This is prompting many companies to seek alternative countries for their manufacturing
• Western digital majors will expand into the Indian and Chinese Internet markets.
True, the likes of Amazon and other majors have invested more money into these territories.
• The eurozone will remain mired in lowflation but will avoid outright persistent deflation.
True: The eurozone as a whole is expected to narrowly miss deflation in 2015 with a low rate of 0.1% forecasted. Euromonitor currently estimates that nine of the 19 member states will have deflation overall for 2015. Some members dipped in out of mild deflation while others such as Greece have had more persistent negative rates but the region as a whole will register inflation, albeit very low.
• Of the central banks governing the USA, UK and the eurozone, the UK will be the first to raise interest rates from record lows in 2015.
False: At the time of writing in early December 2015, no interest rate hike had taken place in the USA, UK or the ECB, owing to rising global economic uncertainty, heightened geopolitical tensions, an environment of lowflation in many advanced economies amid weak global commodity prices, and Chinese economic weaknesses. However, analysts do expect a Federal Reserve increase by the end of 2015 as the signs clearly point to a stronger recovery in the US economy while the UK and ECB have signalled low rates for longer.
• Russia will experience a further deterioration in the quality of its business environment, impacting investment.
True: While Russia has made strong inroads to improving the efficiency of some of its business procedures, it proved to be highly corrupt and politically unstable in 2015, deterring investors.
• Penetration of video-on-demand will overtake the usage of traditional satellite and cable services in some markets.
“True, Netflix, for example, claim to have more users of their services than those of traditional pay-TV services in developed markets such as Canada, Sweden, UK etc.”
• Japan will experience a continued economic crisis in 2015, performing well below the UK and USA, which will be reflected in diverging monetary policy decisions.
True: Japan may or may not have dipped into technical recession again in the third quarter of the year but Euromonitor estimates that the economy will show marginal growth of just 0.5% in 2015 compared to much higher rates of 2.5% for both the USA and UK correspondingly.
• Italy’s economy will remain below pre-crisis 2007 levels in 2015, making it the only G7 economy not to have yet recovered from the global economic downturn of 2008-2009.
True: According to Euromonitor projections, Italy’s total GDP will be 8.2% lower in 2015 in real terms compared to 2007 while all other G7 economies have recovered from the global crisis. Italy is set to register the second lowest real GDP growth of the G7 economies in 2015 at just 0.8%.
• The UK general election will result in another coalition government with UKIP playing a role.
False: The Conservative party won a majority in the May 2015 elections. However, the future of the UK role’s within the EU is set to be decided by a referendum while the migrant crisis has dominated European and UK news for much of 2015.