By John Richardson
"Have you noticed that your parents spend less money than you do?" asks Merryn Somerset Webb in this Financial Times article. She agrees with us that the answer is, of course, "Yes".
This very neatly brings the issue down to a personal level, one that all of us can relate to, and underlines the need for a touch of commonsense in judging the economic future.
The chart above provides statistical evidence to back up the FT's touch of crystal-clear commonsense: US official household expenditure data, categorised above, indicates that spending peaks by the age of 55, and then falls always quite sharply as people age.
This is important because household consumption is between 60-70% of GDP in most Western countries. Thus, US consumers alone are 16% of the global economy. Western consumers in total are 40% of global GDP, equalling the entire GDP of the emerging economies. It is impossible for these countries to replace the spending that is now being lost.
Thus, don't believe the financial sector when it tells you that we can return to the economic Supercycle, or central bankers who think that more economic stimulus will somehow, miraculously, compensate for ageing populations in the West. You cannot, in the long term, stimulate demand that simply isn't there.
This is a lot easier said than done, and to illustrate this point, the blog has a confession to make: it wasn't until early last year, during a long beach-side run, that all of this clicked into place.
Before we ran ten kilometres, and so needed something to take our minds off how unfit we were (and still are), we thought that every recovery in oil prices or rebound in stock markets, and thus a change in the mood of the financial press, was a challenge to the New Normal arguments.
But we now realise that this is all just surface activity, driven by the financial sector and central bank stimulus that has contributed to the volatility in equity and commodity markets.
Chemicals companies need a long term perspective in order to prosper in this new environment in order to see beyond these shor-term fluctuations.
They will need to learn new tools with which to sustain growth. Business model innovation will be essential in order to meet the needs of those market sectors with future growth potential. One example of these is the opportunity to develop new products and services to meet the needs of the New Old 55+ generation.
Technical innovation will also be essential, as the successful products of the future are likely to be based on 'needs', rather than 'wants'. Affordability, rather than premium pricing, will be key, as markets re-segment themselves into a large 'value' sector and a small 'luxury' segment, with little middle ground in between. This will be quite unlike the SuperCycle.
The new IeC Research Note summarises the rationale for the launch of our ICIS/IeC New Normal strategy workshops for company boards and senior executives. These have now been held on four continents, highlighting the global implications of ageing for future business success.