THE world has been anxiously awaiting signs the Chinese along with other emerging market economies will emerge as the new drivers of global export demand to replace the once spendthrift U.S. consumer.
In a new report, Goldman Sachs economists say the BRIC countries â€” China, Brazil, India and Russia â€” can do just that, predicting the four will account for half the globeâ€™s consumption growth in 2010.
The investment bank said China would shine particularly bright, likely accounting for 30% of the worldâ€™s consumption growth next year, which is more than the combined growth of the G3 â€” United States, Japan and Germany â€” as they crawl out of recession.
Goldman Sachs, which coined the term BRIC in 2001, said the emergence of the BRIC consumer is an important development that will create demand and hence support the export markets of developed economies.
The report said consumption in the BRIC economies would be supported by a shift in spending power from the richest countries towards a growing middle-income bloc in the emerging markets. Consumption would likely receive a further boost when the rapid economic growth in China and India feeds through to the rural population.
As these economies develop, the type of goods they consume is also predicted to gradually transform away from low-value-added products, like agricultural goods, to those at the higher end, such as cars, office and telecom equipment.
The Goldman economists estimate that Chinese retail sales, a key indicator of consumption, rose 17.6% in the year ended June, with food and beverages products posting the biggest gains. It said retail sales in Brazil, while lower than in 2008, remained well supported and would likely increase in the third quarter.
India does not measure retail sales, but individual components, such as vehicle sales are used to gauge the appetite for consumption. Goldman said car sales had picked up markedly and were now selling faster than before the crisis.
Russia, after years of strong growth, was the only BRIC country where retail sales growth had suffered. Sales in the year to June fell 6.72% on the back of a sharp fall in non-food products.
But while most agree the BRIC countries will have an increasingly important role to play in the global economy, not all are convinced they can drive demand.