16 September 2009

Survey: Consumers in Emerging Markets Will Hopefully Step In

Global growth may be modest for years to come

Stuart P.M. Mackintosh

Stuart P. M. Mackintosh
Executive Director, Group of Thirty

August 28

We must hope that the modest recovery that we are observing in Europe, Japan and elsewhere is sustained and makes up in part for the drop in U.S. consumption.  In addition, in the medium term we should look to increased domestic consumption in China, Brazil, and India to take up part of the consumption gap seen as Americans retrench and adjust their spending patterns and personal and business priorities to the new normal. 

Americans cannot – and should not – continue to spend and be the principal driver of global growth.  This was unsustainable.  It could not continue.  Going forward we will see Americans save more, spend less and alter their habits. They have had a rude, but necessary, wake-up call.  With unemployment to peak at over 10 percent and to remain elevated for months and years to come, Americans will be wary of returning to their old habits. Prudence is now the watchword.  This likely means that the U.S. gross domestic product growth rate will be lower in the future and that other export oriented or dependent economies may also see a decline in their maximum sustainable growth rate.