Credit Suisse : 9th Credit Suisse Emerging Consumer Survey 2019

Eugene Klerk, Head of Global Thematic Research commented:'In recent surveys, the prospects for the Asian consumer have stood out as the brightest, and we again find India topping our sentiment scorecard supported by positive income characteristics. The most notable and positive regional development this year has been a rapid improvement in consumer sentiment in Latin America. Following a major political upheaval in Brazil and Mexico, we are seeing consumers recording the highest levels of confidence in their personal financial outlook since the start of our survey. Brazil ranks second in our scorecard, leapfrogging China, and, of the two Latin countries our analysts review, has the more secure medium-term outlook in macroeconomic terms in our view.'

Emerging country themes

There are common drivers of change that shape consumer behavior such as the increasing rate of internet and smart phone penetration. The study looks at the following factors in particular.

1. The upswing in e-commerce in Latin America - with over 600 million inhabitants and over 360 million internet users - Latin America offers an attractive growth opportunity in our view.
2. Changing consumer behavior of young respondents in India due to the growth of internet penetration, the sharp slowdown in large ticket purchases in India and the reversal of the flow of household saving from equities into gold.
3. Consumer polarization in China - despite a challenging outlook pictured by the results - we expect the risk of a 'collapse' in consumption to be mitigated by the stimulus packages and tax deduction plans recently announced by the government, and overall consumption growth to remain resilient in 2019. We are constructive with regard to the secular premiumization trend in lower-tier cities as well as structural growth opportunities in service-related consumption and emerging categories.
4. The increasing focus on beauty and big-ticket purchases in Indonesia including property and car purchases.
5. A special section on Thailand describing an inflection point in the country's consumption patterns including moving from durables to non-durables, offline to online activities, cash-based to non-cash payments and from eat-out to dine-in options.

India and China

With more than 2.7bn people, China and India together accounts for 1/3 of the world population. The two demographic giants of the world have a huge and growing market of consumers. While China seeks to reverse its aging population growth, the 'two-child policy' may be too little too late to significantly reshape fertility trends after decades of restriction.

In contrast, India's fertility rate remains above the replacement rate of 2.1 children per woman, maintaining a decent population growth. With higher fertility rates and strong population growth, India is expected to overtake China's long held position and become the most populated country in the world in early 2020s, according to the UN population prospect.

Equally, with India's working-age population soon to surpass China, India may have better demographics for growth. As a result, China's aging population should spend differently than India's large working population.

Wealth creation

• China enrichment has also been very impressive. According to the Credit Suisse Global Wealth Report, in the last 18 years, wealth per adult in China has multiplied by eleven times, (from USD 4,000 to nearly USD 50,000 today), compared to four times in India (from USD 1,826 to USD 7,024).
• China's aggregate wealth increased from USD 3.7trn in 2000 to USD 51.9trn in 2018, compared to India, which went from USD 1trn to USD 5.9trn in 2018.
• To put both economies into perspective, India aggregate wealth today represents only 10% of China's. And according to developed economies standards, a large majority of its population is still poor; with 91% of its population in the 0 to USD 10,000 wealth bracket.
• However, due to its very large demographic advantage, India ranks 12^th in the world in terms of total wealth and de facto consumption power.
• China ranks second benefiting from good demographics and important wealth creation. In the past 18 years, 52% of the population moved to the USD 10,000-USD 100,000 wealth bracket, while 7% of the population moved to the USD 100,000-USD 1,000,000 one.
• Similarly to developed economies, nearly 70% of wealth is held by the top 10% of earners in both China and India -accumulation of wealth is not homogeneous.

Spending outlook

• Final consumption is set to continue to increase in both China and India. China is the second-biggest final consumption market in the world (after the US), benefiting from both economic and demographic growth. India's share is smaller, but its share should rise as total wealth and income increase on the back of supportive demographics.
• China is more advanced than India when it comes to demographics, education, family composition and urbanization factors. We expect China to retain higher purchasing power than India in the next decade making it the more 'discretionary' consumer.
• Patterns of consumption are set to evolve. Although most of both Chinese and Indians' incomes are still spent on basic necessities such as food and non-alcoholic beverages, the pro-rata allocated to it has nearly halved over the past thirty years. This mix shift should continue as wealthier consumers tend to spend a larger proportion of their income on non-essential goods such as durables and consumer services.
• Rapid aggregate wealth accumulation should ultimately shape more sophisticated savers as well as consumers in both countries. We expect savers to diversify their asset allocation progressively towards financial assets in the years ahead.