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Demographics are the real problem

August 25, 2010

While marketers maybe concerned about the prevailing head and tailwinds of the economy, these short-term yardsticks are nothing compared to the demographic time bomb that everyone is going to have to face up to sooner than they think.

Bill Gross of PIMCO investments was concerned enough about the trends to write this, in a recent newsletter.

“The preceding analysis does not even begin to discuss the aging of this slower-growing population base itself. Japan, Germany, Italy and of course the United States, with its boomers moving toward their 60s, are getting older year after year. Even China with their previous one baby policy faces a similar demographic. And while older people spend a larger percentage of their income – that is, they save less and eventually dissave – the fact is that they spend far fewer dollars per capita than their younger counterparts. No new homes, fewer vacations, less emphasis on conspicuous consumption and no new cars every few years. Healthcare is their primary concern. These aging trends present a one-two negative punch to our New Normal thesis over the next 5–10 years: fewer new consumers in terms of total population, and a growing number of older ones who don’t spend as much money. The combined effect will slow economic growth more than otherwise.”

The general slowdown in consumer spending is unlikely to be temporary and unless creative ways can be found to encourage the older boomers to spend in markets beyond healthcare, growth will be a considerable challenge.

Posted by Ed Cotton

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