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Top Megacities for Growth in 2016

by
February 14th, 2016

At the beginning of 2016, the world counted 30 megacities with more than 10 million inhabitants: from 11 million in Wuhan (China) to 37 million in Tokyo (Japan). In terms of consumer market size, however, the world’s megacities represent a much more diverse group. In 2015, annual consumer expenditure peaked at US$900 billion in New York, making it 52 times larger than in India’s megacity Kolkata. These extremes illustrate that while emerging urban markets are likely to continue their dynamic market growth, developed megacities should not be ignored.

Growth in Consumer Expenditure in World‘s Megacities: 2015-2016

Growth-in-Consumer-Expenditure-in-Worlds-Megacities-2015-2016

Note: figures are provided in constant 2015 prices, at fixed exchange rates

New York, Los Angeles and London lead the rankings

In 2016, consumers in New York, Los Angeles and London are forecast to spend US$13-23 billion on top of what they spent in 2015 (at constant 2015 prices and fixed exchange rates). Over the same year, spending in Tokyo and Seoul is expected to surge by roughly US$7 billion in each city. Tokyo will account for nearly all increase of consumer spending in Japan. Growth in Seoul will account for 55% of national growth.

Consumer Expenditure Growth in the World’s Megacities: 2015-2016

Consumer-expenditure-growth-in-the-worlds-megacities

Note: The width of bubbles in the chart represents total consumer expenditure in the city in 2015 (in US$ billion). The wider the bubble, the larger the market size of the city, as measured by total consum expenditure. Growth in consumer expenditure on Y axis is provided in constant 2015 prices, fixed exchange rates.

Although economic growth is anticipated to slow further in China over 2016, rise of private consumption will continue to outpace real GDP growth. Along with advancing urbanisation, it will lead to expanding consumer markets in virtually all Chinese cities that are researched by Passport Cities. Shanghai and Beijing, for example, are forecast to expand by US$11 billion in consumer spending each, while Guangzhou, Tianjin and Shenzhen will each surge by US$6-7 billion. Together these cities will account for 13% of national growth in consumer spending and 23% in national population increase.

With per capita spending anticipated to rise by 6%, consumers in Shanghai, Beijing, Guangzhou, Tianjin and Shenzhen will not reach the average of the developed world in 2016, though higher spending per capita will shift towards spending more on discretionary consumer goods and services. For instance, a record number (more than 2.3 million) of Chinese consumers are anticipated to travel to the US for shopping holidays in 2016.

Hotspots outside of China include Jakarta, Bangkok and Istanbul. In terms of total consumer expenditure, they are each forecast to expand by US$3-5 billion in 2016. While spending per capita in Jakarta is relatively low (US$3,000 in 2015), Bangkok (US$6,000) and Istanbul (US$10,000) are roughly in line with Chinese megacities. By 2019, each of these three megacities is estimated to have 4-5 million households with disposable income over US$10,000, which will be about the amount that Tianjin, Guangzhou or Shenzhen has today.

Media headlines emphasise rapid growth of a number of emerging markets and contrast them with slow developments in developed countries. However, percentage change in consumer expenditure disregards the overall market size. As the quick overview here suggests, the largest absolute increase in consumer expenditure will take place in some key megacities of the developed world.

Detailed Consumer Expenditure Forecasts in the World’s Megacities: 2015 and 2016

City Consumer Expenditure, US$ billion 2015 Growth, US$ billion 2015-2016 Per Capita Consumer Expenditure, US$, 2015
Developed:
New York (US) 900 23 44,626
Los Angeles (US) 529 14.9 39,506
London (UK) 510 13.4 30,696
Tokyo (Japan) 773 7.5 20,809
Seoul (South Korea) 350 7.3 14,117
Paris (France) 290 4.1 23,909
Osaka (Japan) 374 0.7 19,381
Emerging:
Shanghai (China) 162 11.2 6,418
Beijing (China) 127 11 5,607
Guangzhou (China) 91 7 6,819
Tianjin (China) 70 6.6 4,189
Buenos Aires (Argentina) 150 5.9 11,077
Shenzhen (China) 76 5.7 6,907
Jakarta (Indonesia) 86 4.6 2,702
Bangkok (Thailand) 99 4.2 6,297
Delhi (India) 39 4.1 2,130
Karachi (Pakistan) 38 3.6 1,374
Wuhan (China) 42 3.5 3,952
Istanbul (Turkey) 146 3.4 9,754
Manila (Philippines) 80 3.2 3,026
Mumbai (India) 41 2.7 2,145
Lagos (Nigeria) 41 2.7 3,865
Cairo (Egypt) 76 2.6 3,241
Tehran (Iran) 44 1.5 3,447
Mexico City (Mexico) 150 1.4 6,977
Ho Chi Minh City (Vietnam) 22 1.3 1,928
Kolkata (India) 17 1.2 1,204
São Paulo (Brazil) 149 -1 7,089
Moscow (Russia) 147 -1.4 7,392
Rio de Janeiro (Brazil) 84 -1.4 6,709

Note: figures are provided in constant 2015 prices, at fixed exchange rates.

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Ugne Saltenyte

Ugne Saltenyte is Macro Analysis Manager at Euromonitor International and focuses on developing analytical content and interactive tools to leverage macroeconomic data. Ugne holds a Master’s degree in Applied Macroeconomics from Vilnius University and has been involved in research and analysis since 2006. Over the years she has built her professional experience in market intelligence and business consulting services.