Take a deep dive with us into indicators of consumer confidence and future spending, including key surveys that measure trends in households’ consumption and savings, and their expected financial situation.
Why Consumer Indicators are critical for your trading strategy
As an economy matures, the prominence of consumer spending becomes increasingly important. That’s why economic data that measures consumer spending and confidence deserves your attention.
According to the World Bank, household consumption accounts for around 68% of GDP in the US, and around 66% in the UK.
When considering the services sector as a whole, these proportions increase to around 80%. The industry makes up a relatively small proportion of the economy. So for both the US and UK, the consumer outlook is vital, and indicators that reflect this are considered to be very important.
In recent years, one of the big global economic stories has been the rebalancing of the Chinese economy. China has been structurally shifting away from being an investment heavy, export and manufacturing-driven economy; and re-orienting the toward a more consumer-based economy.
In 2018, household consumption only generated around 39% of GDP in China (from approximately 35% in 2010). The outlook, however, is already changing rapidly. The services sector accounts for around 52% of GDP (about 48% being industry and construction). This rebalance has further to go, and in the years ahead of the services data will provide an increasingly important view of the transition. For now, both consumer and industrial data hold similar weighting for China.
In Germany, industry and export are still critical economic factors, and consumer spending is less prominent than the US or UK. German household consumption drives around 52% of GDP, with the broader services sector around 62%. When looking at German data (which by extension impacts on the Eurozone), as with China, there is a relatively equal weighting given to industrial and consumer indicators.
Consumer spending can have a significant impact on the performance of domestic investments such as currencies, bonds and equities. The scale of the impact will vary from country to country.