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Growth in global consumer spending is has been slowing – but the latest value of PwC's new Global Consumer Index (GCI) suggests that the slowdown may have eased in October. This may lead to a gradual recovery in 2013.
The Index is a leading indicator of trends in the global consumer cycle. It combines dozens of economic series into a single index, which historically has tracked global consumer spending closely. It is unique in that it provides an early warning indicator of trends at a global level, giving businesses and policy makers an indication of future consumer demand for goods and services and an early steer on short-term growth prospects.
We present the results of the index in two ways (see figure on next page):• Growth:
this is the current year-on-year growth rate of the index. This declined for five consecutive months over the summer, although the latest value shows it ticking up to 1.7% in October, from 1.5% in September. This is significantly below the long-run average value of 2.8%, and the recent figures are the lowest since the end of the financial crisis.• Momentum:
this looks at what annual growth would be if the index were to grow at the rate of the last three months for a whole year. Following four consecutive and sharp monthly falls, this briefly turned negative in August. The latest value shows it recovering slightly to 1.0% in October from 0.2% in September. This is a relatively good story, as had the Momentum score stayed negative it may have implied a double dip in the consumer spending cycle.
Richard Snook, senior economist at PwC and lead author of the report, says:
"The global economy has been losing steam over the last year. Much of Europe is either not growing or back in recession, the recovery in the United States has slowed, and concerns over a slowdown in emerging markets is rising. In this context, the consumer cycle will be crucial in determining growth prospects."
"The latest Growth and Momentum figures suggest very low growth, but currently no double dip recession in the global consumer cycle. However, we do expect a gradual recovery in global consumer spending during 2013, assuming no major averse shocks from the Eurozone or global commodity prices."
Christine Cross, PwC Chief Retail and Consumer Advisor, says:
"The effects of this continued slowdown will be felt across the retail and consumer supply chain. Manufacturers need to be cognisant of changes in both their domestic and export markets. As the GDP of both developed and developing economies reduces so will consumer propensity to spend on discretionary items in particular. Retailers may not only feel the impact of this on their domestic trade, but those with actual or planned exposure to sales in international markets may also see a slowdown. Advance warning of this protracted decline means cash and working capital management remain key for the rest of 2012 and Q1 2013."
The report finds that there are many indicators in each country that may give insight into the consumer cycle, such as confidence surveys, commodity markets, equity indices and other financial market data. To make sense of it all, PwC has analysed and compiled key leading indicators of consumer spending into a single global index – the PwC Global Consumer Index, which will be updated each month, and included in the firm's Global Economy Watch report.