By 2025 the world will have 4.2bn consumers

It’s enough to get any business salivating. A new McKinsey & Company report finds the world’s consuming class will nearly double over the next 13 years, with an estimated 1 billion new city-dwelling consumers injecting $US30 trillion into the global economy.

According to the report, Urban world: Cities and the rise of the consuming class, about 440 emerging market cities will provide 47 per cent of expected global GDP growth between 2010 and 2025 amid a wave of urbanisation in developing countries.

“At a time when mature economies are facing the challenges of deleveraging and aging, the urbanisation wave in emerging markets is a positive force for global growth,” McKinsey Global Institute (MGI) director Richard Dobbs says.

“The urban shift is changing the balance of the world economy, and government, investors and businesses need to ensure that they understand and respond.”

Among the report’s findings, MGI says the world’s consuming class will soar to 4.2 billion people by 2025, up from 2.4 billion this year and 1.2 billion in 1990, and that the rate of urbanisation in countries such as China is proceeding at more than 100 times the speed of the UK’s industrial revolution.

“By 2025, urban consumers are likely to inject around $US20 trillion a year in additional spending into the world economy,” the reports authors write.

“Catering to the burgeoning urban consumer classes will also require a boom in the construction of buildings and infrastructure. We estimate that cities will need annual physical capital investment to more than double from nearly $US10 trillion today to more than $US20 trillion by 2025, the lion’s share of which will be in the emerging world.”

Among other observations from the report:

• The world’s economic balance will shift east and south.
• The growth in demand for many consumer good will exceed the expansion of the consuming classes because of the rate at which household incomes are rising and changing demographics in countries such as China and India.
• Companies will “need to take a more scientific approach to locating the most promising markets for their businesses” and executives may need to start deciding corporate locations by city, rather than country.
• “Rapidly growing cities in the developing world face a complex and challenging task to keep pace with their expanding populations; investment, planning and meeting the labour aspirations of their new inhabitants.”

The reports authors note that the rise in the world’s consumer classes carries challenges and that rising wealth could put further upward pressure on the global investment rate and resource prices.

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