Things change quickly in the retail sector, especially in China. Over the next five years, the Chinese market will roughly double in size, overtaking the US—the current market leader—for the first time. By 2022, China’s retail market will grow to twice the size of the US. These and other retail forecasts are featured in a new report from the Economist Intelligence Unit, Retail 2022 (free registration required).
China already overtook the US as the world’s largest food and grocery market this year. Future expansion will be fuelled by the country’s swift GDP growth. In 2002 China’s nominal GDP was less than 15% of the US; it now stands at 52% of American GDP. We expect the nominal size of China’s economy (in dollar terms) to surpass the US by 2022.
The combination of economic growth and urbanisation is fuelling China’s rapid retail expansion, and not just in first-tier cities such as Shanghai and Beijing. Rising wages and government-driven efforts to boost consumer spending will see the share of inland urbanites earning over Rmb30,000 (US$4,805) per year in places such as Xi’an and the Chang-Zhu-Tan city cluster roughly double between 2012 and 2022. Given this outlook for China’s burgeoning urban middle-class shoppers, it’s easy to see why many retailers are redoubling efforts to build a presence in the country.
The EIU's Consumer Goods Briefing assesses the consumer goods and retail industry in the world's biggest markets. It leverages the expertise of EIU analysts and data from Planet Retail to offer five-year forecasts for a range of sub-sectors.
The euro area debt crisis looms large in the Economist Intelligence Unit’s latest global forecast (free registration required). We expect GDP in the euro area to shrink by 0.3% next year, and that’s assuming that the currency union will (just) stay together.
The impact of Europe’s woes on global growth is significant, not least via reduced demand for emerging markets’ exports. We expect global GDP growth, at purchasing-power parity, to slip to 3.3% in 2012, down from 3.8% this year (at market exchange rates, growth appears more modest). Rebuilding-related growth in Japan will support growth, but waning momentum in the US will dampen global prospects. Emerging markets will grow swiftly by comparison, but less swiftly than in previous years.
The biggest risk to this forecast is the outcome of the euro area’s financial crisis; a break-up of the currency union would produce a much deeper global downturn than we currently predict. (For more on our thinking about a potential euro break-up, see the special report “After Eurogeddon”.) In this context, growth that only narrowly avoids recession—the IMF considers global growth below 3% to represent a world recession—may not be such a gloomy forecast after all.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
According to a survey by the Economist Intelligence Unit, London is the most “shoppable” city in Europe. The survey, commissioned by financial services firm Global Blue, awards London top marks—67.3 out of 100—based on five categories: shops; affordability; convenience; hotels and transport; and culture and climate.
It is not surprising that London ranks highly as a retail mecca, given its allure to shoppers visiting from China, the Middle East and elsewhere. The capital’s appeal to locals, however, is not as apparent. Last week, the Bank of England revised down its forecast for GDP growth, unemployment hit a 15-year high, and consumer confidence plumbed historically low depths.
The EIU/Global Blue survey’s headline rankings are derived from an equal-weighted index. The survey website allows users to alter these weightings, however, and after some tinkering it becomes clear that London’s position is highly sensitive to one’s view on affordability. When it comes to affordability metrics, the British capital ranks 24th out of 33 cities rated; boosting the weight of affordability in the index sees London drop behind Barcelona and Madrid in the overall rankings.
London may benefit from a wide range of shops, but it seems increasingly reliant on shoppers from abroad as hard-hit, cost-conscious locals will probably keep a tighter grip on their wallets.
The EIU's Consumer Goods Briefing assesses the consumer goods and retail industry in the world's biggest markets. It leverages the expertise of EIU analysts and data from Planet Retail to offer five-year forecasts for a range of sub-sectors.
A new survey of executives by the Economist Intelligence Unit adds another perspective to the all-but-inevitable event roiling financial markets: a Greek default. Nearly three-quarters of more than 300 executives polled by the EIU over the past week believe that Greece will eventually default on its debt. (For the full survey results, visit the EIU’s Business Research site.)
On Monday, euro area finance ministers released a statement calling for a “broader and more forward-looking policy response” to Greece’s ongoing struggles with its crushing debt burden. On the same day, Greek prime minister George Papandreou added his thoughts on the matter, warning that “if Europe does not make the right, collective, forceful decisions now, we risk new, and possibly global, market calamities due to a contagion of doubt that will engulf our common union.”
In the EIU’s survey, a small but noteworthy minority of respondents, 12%, think that the impact of a Greek default will be of a similar scale and magnitude of the collapse of Lehman Brothers in 2008. A larger share of executives, 47%, predict a significant, long-lasting impact, but with the pain largely confined to the euro area. The remaining respondents either expect little impact or weren’t willing to hazard a guess.
With Greece’s benchmark bonds trading at half of face value, and spreads for Spain and Italy recently touching euro-era highs, officials are scrambling to stem the contagion from the monetary union’s troubled periphery. There is talk of an emergency euro summit on Friday, when release of the EU’s bank stress tests could destabilise markets further. But true to form, euro area officials are finding it difficult to come to an agreement on whether to meet or not.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
In most large countries, loan growth of 17% would represent a breakneck pace. In China, such growth is perceived as sign of a slowdown.
In May, the value of China’s outstanding bank loans rose by 17% from the year before, the slowest pace since late 2008. A series of interest rate increases and, more importantly, hikes to banks’ reserve requirements appear to be cooling the stimulus-fuelled surge in lending recorded in the months after the global financial crisis. The latest boost to reserve requirements, announced today, is the sixth hike so far this year. More increases are likely in the coming months, as worries persist over rising consumer inflation—5.5% in May—and a frothy property market. Still, the Economist Intelligence Unit expects China’s GDP to grow by 9% this year, only a modest slowdown from the 10.3% growth recorded in 2010. Despite the central bank’s tightening measures, credit conditions will remain relatively loose.
(Note: Some data in this post, and the accompanying chart, have been updated to reflect revised historical data.)
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
After reaching a (nominal) record price early this month, gold is back in the news, with prices resuming their climb after a mid-month stumble. Risk aversion tied to renewed fears over the euro area is generally cited for the recent spurt.
Taking a longer view, the Economist Intelligence Unit believes that the gold price is now at or near its peak (details can be found at our Global Forecasting Service site: free registration required). The average price is expected to peak this quarter, with an 8% slide forecast for the second half of the year. Monetary tightening and a stronger dollar should push the gold price down further in 2012—in terms of the average annual price, we expect a decline of 12% next year.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.
A series of tough measures, accompanied by equally tough talk, have made it clear that Bank of Israel governor Stanley Fischer is determined to prevent a crisis in Israel’s property market.
Israel’s latest directive imposing restrictions on the mortgage market was issued by its newly-appointed banking sector regulator, David Zaken, on April 28th and took effect on May 5th. It restricts the share of mortgages with adjustable rates that change at least once every five years to one-third of total lending. This restriction applies to all forms of financing in use in Israel, namely shekel floating-rate mortgages, loans linked to the consumer price index and loans linked to exchange rates (generally the shekel versus the dollar). According to the latest central bank data, these three channels comprise 48%, 32% and 6%, respectively, of total mortgage borrowing.
Read more at Financial Services Briefing: “Pre-emptive strike” (May 6th)
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
Today, Standard & Poor’s announced a new equity index based on the CIVETS countries. The moniker, coined by the Economist Intelligence Unit a few years ago, describes a group of sizeable emerging markets—Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa—with appealing conditions for sustained high growth. Although not yet part of common parlance like the BRICs (Brazil, Russia, India and China), the CIVETS are generally the most-discussed markets in the next tier of emerging economies.
For its part, S&P describes the group as characterised by “dynamic, rapidly changing economies and young, growing populations.” Back-testing its new index, the CIVETS-based construction has recently outperformed indexes based on the BRICs as well as emerging markets in general. But this is not to say that shares in the CIVETS countries are uniformly buoyant: since the start of 2008, Colombian large caps have risen by more than 60% while large Egyptian stocks have shed more than 50% of their value. The group is an eclectic mix of political and economic systems, with financial markets of widely varying maturities. Thus, an index built from the CIVETS offers exposure to a targeted yet diversified basket of important emerging economies.
The recent performance of CIVETS shares will attract adventurous investors seeking outsized returns, much like intrepid coffee lovers who covet a rare, expensive type of bean harvested with the help of the civet, a cat-like mammal. In a less auspicious omen, civets were also linked to the spread of the deadly SARS virus.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.
“Straightforward to characterise, but difficult to quantify”. The Independent Commission on Banking (ICB), a group assembled by the British government to make recommendations on regulatory reforms, delivered its interim report on April 11th. “Everyone agrees that we need a much more robust banking system than that of the past decade”, said Sir John Vickers, the ICB’s chairman.
A week after the report’s publication, markets continue to mull the implications of the report, as well as the prospects for British banking in general. Tellingly, the initial rally in many banks’ shares immediately following the release of the report quickly fizzled, with all of the major banks now trading below the levels seen on the eve of the report’s publication
It appears that the UK’s approach to restructuring its banking system will rely on higher capital requirements for retail units and an attempt to engineer a viable “challenger” to the biggest banks from the portfolio of Lloyds Banking Group. Other countries with significant financial centres, like Switzerland, have already gone further on capital requirements while others, like the US, have been stricter on limiting the market share of major players.
It may take years to judge whether regulators can promote a more stable and competitive banking market in the UK. In the meantime, markets have shorter-term concerns.
Read more at Financial Services Briefing: “For better or worse” (April 20th)
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.
These are tense times for Turkish bankers. The five-year term of Durmus Yilmaz, the country’s central bank governor, ends on April 18th. His successor, announced on April 14th, is Erdem Basci, a long-standing deputy governor. The change at the top comes as the risks to Turkey’s economic and financial stability are rising, not least due to a ballooning current account deficit fuelled by a credit-driven surge in domestic demand.
The appointment of Mr Basci ensures continuity at the central bank, but since he is seen as close to deputy prime minister Ali Babacan worries are surfacing about the extent of the central bank’s independence from the government. The unorthodox two-pillar approach adopted by Turkey’s central bank since December has combined steady increases in banks’ reserve requirements at the same time as reductions in short-term interest rates. Although government ministers have commended these policies, Turkey’s bankers complain that recent measures unduly punish the industry.
Read more at Financial Services Briefing: “Changing of the guard” (April 14th)
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
