Consumer Driven Commodity Bull Market
A couple of weeks ago, I wrote an article in which I stated the following:
RCom wants to expand services in 50 countries in EUIt is important to note that there are two components to the Chinese commodity demand. The first component is the demand for commodities as a result of industrialization and foreign investments. The second component is a result of consumer demand. Read "China, Jim Rogers, and Commodities"
In this article, I will focus on the "consumer demand" factor that will push commodity prices to record highs over the next several years. I will also highlight some of the commodities that should soar during this stage.
A Tale of Two Economies: Emerging vs. Developed
It is much easier to understand the impact that the emerging consumer will have on commodities (and their respective economies) when one examines the impact that the developed consumer currently has on his economies. In terms of raw data, consumer spending accounts for just over 60% of GDP in Europe. This number is even greater in the United States, where personal consumption accounts for greater than 70% of GDP. In comparison, personal consumption in China only accounts for 37% of GDP. The other two components are exports (27%) and investments (41%).
In the United States, the consumer has been responsible for the direction of the US economy over the last decade. After the dotcom collapse, the US consumer contributed to GDP growth by spending money on goods and services. While this "economic boost" was artificial in nature, largely due to the housing bubble, a record amount of mortgage equity withdrawals, and rising credit card debt, it did ultimately contribute to record corporate earnings and a rising stock market.
Unfortunately, this trend did not last. I once stated that I believed that "corporate profits will dry up as quickly as the consumer says I can't afford to make my mortgage payments' or I have cut back on my spending because my adjustable rate mortgage just went fixed'". This is exactly what has happened over the last year.
- 1 MySpace suicide conviction tentatively dismissed
- 2 PIMCO:
- 3 Boeing may buy plant from 787 supplier: report
- 4 U.S. June payrolls fell 467,000, jobless rate rises
- 5 U.S. marshals seize Madoffs $7 million NY apartment
- 6 NY thieves want iPhones, victims fight back
- 7 Intel-Nokia tie takes few years to succeed: Barrett
- 1 China to launch stock exchange for smaller companies
- 2 Obama bringing hefty agenda on European trip
- 3 GM sees bankruptcy risk
- 4 For Wall Street, March is best month since 2002
- 5 North Korea missile consistent with satellite: U.S.
- 6 HK, Shenzhen agree on innovation plan
- 7 $6.6b Gov't deficit recorded
- 1 HK, China shares drop on valuation concerns
- 2 HK shares drop for second day; China stocks outperform
- 3 Stock futures point to higher open
- 4 Stock futures turn positive as banks gain
- 5 Stock index futures point to mixed start
- 6 Investors lift stocks, seeking rebound signs
- 7 U.S. stock index futures point to mixed start
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