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Global Consumption To Roar Back By Steven Mayo Here’s why. The growth of the “middleclass” around the world continues, and the numbers are incredible. The first round of COVID consumption was focused on home improvements, and toys. In 2020 we were at home, or had to stay local. People were buying cars, trucks, RVs, and boats, spending on decks, fences, pools, or upgrading the interior of their home. For 2021 the next consumption binge is for experiences, all of which we used to be able to do, but were placed on hold. It will be back to travel and leisure, staying at hotels, flying on airplanes, dining out, attending sporting events and concerts, casinos, and the theatre. As I write, these areas are starting to improve, based on the rollout of multiple vaccines. It takes time but vaccinations and rapid testing will open the door for more of us to plan experiences. Of course, we will likely
start small by going to local restaurants and events, before considering other destinations, or crossing borders. The stock markets are already looking forward to better days, seemingly ignoring the spike in COVID cases and subsequent deaths we experienced in January. Markets do tend to do this. Yes, there will be setbacks along the way, but I believe 2021 will be a story of the return of global consumption. The buying power of the growing middle class will be the spark. The Brookings Institution, and authors Homi Kharas and Meagan Dooley, compiled the following list of the Top 10 Countries by total middle class expenditures in 2020 (in trillions of US dollars): China $7.3; USA $4.7; India $2.9; Japan $2.0; Russia $1.6; Germany $1.5; Indonesia $1.2; United Kingdom $1.1; Brazil $1.1 and France $1.0.
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Interestingly enough total household consumption in the United States is actually higher than in China because of consumption by rich U.S. consumers. China now accounts for 33 to 50% of global car sales and 40% of Smartphone sales globally. In 2019 Chinese citizens took a staggering 300 million vacation and business trips, with more than half abroad. It’s likely that global consumption trends will be back on track relatively soon, and this could mean that demand begins to exceed supply for certain destinations and airline routes. The good old days will be back. I can hardly wait, but for now I try to control my dreams. Let’s wrap up with two quotes. The first from Eugene Ionesco: “Ideologies separate us. Dreams and anguish bring us together.” The second from Eleanor Roosevelt: “The future belongs to those who believe in the beauty of their dreams.” Steven Mayo is a Vice President, Director, and Investment Advisor with RBC Dominion Securities Inc. (Member — Canadian Investor Protection Fund). This article is not intended as nor does it constitute investment advice. Readers should consult a qualified professional before taking any action based on information in this article.
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