Consumers in Advanced Economies Remain Unsure of Better Times Ahead

As attention turns to potential increases in interest rates, and the recovery becomes more established, the feel-good factor amongst consumers seems to remain elusive in many advanced economies.

Return to strong(ish) growth

Economic growth is certainly more robust, but still could not be described as “strong” in many economies. In 2014, five of the 40 advanced economies for which we have data, saw economic growth of 3% or more, compared to 28 economies in 2007. In 13 of these 40 countries, total GDP remained lower in 2014 than it had been in 2007.

Advanced Economies with Falls in Real GDP 2007-2014

Falls in GDP

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/IMF

Working smarter

One of the challenges for many advanced economies is weak productivity growth and it is this which is contributing to the slow pace of recovery. This weakness raises concerns about long-term growth as gains in productivity are a major driver of economic growth. In addition, weak productivity gains suppress real growth in wages.

Real Growth in GDP per Hour Worked in Selected Advanced Economies: 2000-2014

GDP per hour worked

Source: OECD

Emerging markets in the doldrums

The cyclical slowdown we are seeing in emerging markets is adding to a general state of uncertainty globally. Its flow-on effects are being felt in boardrooms across advanced economies. The slowdown in China and the anti-corruption drive there is having a significant impact on the luxury sector in particular. The fundamental shifts in the Chinese economy will impact consumer goods companies’ strategies into the long-term.

Real GDP in Emerging and Developing Economies: 2000-2014

GDP emerging and developed

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/IMF

Consumer confidence on shaky ground

Although confidence has been stronger in recent years, issues remain. People have seen how fragile their circumstances are and this does not lead to a surfeit of confidence. We see this in spending on durable goods. There has been a startling 7.4% decrease in real terms in spending on durable goods since 2007 across advanced economies. In just six of the 32 advanced economies for which we have data was spending on durable goods greater in real terms in 2014 than it was in 2007.

Advanced Economies with Real Falls in Consumer Expenditure on Durable Goods 2007-2014

Falls in consumer expenditure

Source: Euromonitor International from national statistics/Eurostat/UN/OECD

Long-term fears

Pew research from Q1 2015 has shown that few people in Europe believe their children will be better off in the future than they themselves are today. Only a small minority think the economy will improve in the next 12 months – although at 24% the median is the most positive figure since 2007.

Economic Views in Major European Economies: Q1 2015

Economy is good (%)

Children will be better off financially than parents (%)

Economy will improve in next 12 months (%)





























Source: Pew Research Center. Spring 2015 Global Attitudes Survey. Q3, Q4, and Q6.

In the USA in the first quarter of 2015, 7.9 million homes remained in negative equity (the home loan exceeds the value of the property).  The total amount of negative equity totalled US$579,274 million – equivalent to more than the entire GDP of Nigeria or Poland. This is a huge improvement on previous surveys, but nevertheless the proportion remains sizeable.

10 US States with the Highest Proportion of Mortgages in Negative Equity: Q1 2015


Source: Zillow Real Estate Research

Note: Data refer to Q1 2015. Negative equity refers to those who owe more on their mortgages than their house is worth.

In Europe in particular the Greek crisis means that austerity, debt, deficit reduction and weak economic growth remain at the forefront of economic news. Even in the UK, where the economy has grown by 2.8% in 2014 – the strongest growth of the G7 – the government remains committed to its austerity programme.

More careful than carefree

The outlook may be as bright as it has been for years across many advanced economies, but this is relative. What is more, risks to growth remain elevated. This, and the duration of the recession, which has led to many consumers retaining recession-learned habits, means that the happy-go-lucky consumer is a thing of the past.

Real GDP Growth in Advanced Economies: 1980s-2020s

GDP Growth

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/IMF