Having broadened and deepened its fixed income capabilities significantly over many years, AllianzGI is now taking the natural next step in the evolution of its fixed income offering by bringing its capabilities into an integrated, global structure.
We recently surveyed consumers in China, Brazil, Mexico and Germany to get their views on planned spending, financial priorities and more. From big-ticket items to smaller purchases, emerging-market consumers seem willing to spend – and they want to travel more frequently.
With household consumption representing around 60% of global GDP, consumer sentiment is a factor investors should incorporate into their decision making
More than 70% of emerging-market consumers plan to buy property and vehicles in the next five years
More than 8 out of 10 consumers in emerging-market countries said name brands are important when purchasing a consumer product, food or cosmetics
Chinese consumers we polled said positive economic growth is the reason they expect to travel more in the next 12 months
Consumers have long been the engine that powers the global economy. As global growth returned to solid levels in the years since the financial crisis, household consumption rose to around 60% of global GDP, according to the World Bank, making consumer sentiment a factor investors can’t afford to ignore.
A new study from Grassroots® Research – Allianz Global Investors’ proprietary in-house research division – reached 1,000 consumers in China, Brazil, Mexico and Germany to get their views on planned spending, financial priorities, travel and more.
Emerging-market consumers plan big purchases
The study revealed that more than 8 out of 10 respondents in emerging-market nations – China, Brazil and Mexico – plan to purchase a vehicle in the next five years. Meanwhile, almost three-quarters plan to buy furniture or appliances in the next 12 months, and more than 71% plan to purchase property in the next five years.
The picture was different in Germany, highlighting the cultural and socioeconomic differences between Germany and the emerging-market countries we surveyed. Just under one-third of German respondents hoped to buy property in the same five-year time frame, while around the same number said they considered property ownership unimportant. This is in line with statistics showing that Germany has one of the lowest homeownership rates among developed nations, according to the OECD. Consumers in Germany also showed a lower intention to buy a vehicle, furniture or appliances compared with their counterparts in emerging-market countries.
Aspirations for trading up are strong in emerging markets
Emerging-market consumers also showed clearly positive sentiment around smaller-ticket items, according to our survey, and people in Brazil, China and Mexico were much more drawn to name-brand products than were value-conscious German consumers.
For example, in Germany, price was by far the most important factor cited when considering purchasing a consumer product, food or cosmetics, and a mere 46% were concerned with name brands. Meanwhile, 83% or more of emerging-market respondents rated name-brand items somewhat to extremely important when making such purchases.
Value is paramount for consumers in Germany Question: Which attribute/factor do you consider most when making a purchasing decision about a consumer product/food/cosmetics, assuming product quality is acceptable?
Source: Grassroots® Research. Data as at May 2018.
When asked to identify their top financial priorities, life experiences – dining/entertainment, travel and social activities – dominated in all four countries. However, Chinese consumers showed a very low preference (3%) for paying down debt and a very high preference (50%) for putting money to work on life experiences. Spending on life experiences also ranked highest among Brazilian consumers, even though respondents there were also focused on paying down debt.
Brazil and Mexico, despite their high levels of aspirational spending, also stood out for wanting to be able to spend a little more on everyday items, suggesting some potentially pent-up demand for consumer staples.
Half of respondents in China value life experiences the most Question: What is your current top financial priority?
Source: Grassroots® Research. Data as at May 2018.
Travel outlook is positive but influenced by cultural factors
Travel intentions also seemed to reflect the ambitions and optimism of the emerging-market consumer, with 81% of respondents in China citing a positive economic outlook as the reason they expect to travel more in the next 12 months.
Alec Patterson, Sector Head of the US Consumer Research team at Allianz Global Investors, found it notable that a lower number of Germans (40%) than emerging-market respondents (57%) travel multiple times per year. “This was somewhat surprising, as was the fact that a majority of Germans seem to want to maintain the status quo. Meanwhile, consumers in Brazil, China and Mexico showed a high desire to travel more frequently.”
Still, conclusions about consumer sentiment cannot be based on travel results alone, since travel is often influence by tradition and culture. Research Analyst Bianca Schnieder, who specializes in European consumers, noted that Germans still generally scored high in terms of their overall desire to travel. “This needs to be seen in the context that Germans – in particular, German families – often take a long summer holiday of two or more weeks,” said Schnieder. “Chinese consumers tend to prefer shorter-duration holidays, and they can increasingly afford to travel multiple times per year.”
Grassroots® Research is a division of Allianz Global Investors that commissions investigative market research for asset-management professionals. Research data used to generate Grassroots® Research reports are received from independent, third-party contractors who supply research that, subject to applicable laws and regulations, may be paid for by commissions generated by trades executed on behalf of clients.
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The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities. In mainland China, it is used only as supporting material to the offshore investment products offered by commercial banks under the Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations.
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About the author/s
San Francisco, California
Ms. Wong is a research analyst and an assistant vice president with Allianz Global Investors, which she joined in 2015. She is a member of the Grassroots® Research team, a division that commissions proprietary and customized investigative research, where she manages market research projects for asset-management professionals. She was previously a research associate at Dow Jones. Before that, Ms. Wong was an undergraduate instructor and lecturer at San Francisco State University; she also held a variety of research roles at UCSF Medical Center, UCLA and San Francisco State University. Ms. Wong has a B.A. in psychology and sociology from UCLA, and is a master’s degree candidate in developmental psychology at San Francisco State University.
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