Low Western pensions will change demand patterns

Chemical companies, Consumer demand, Economic growth, Financial Events, Pension funds

Pension fund Sept11.pngNext week, the blog publishes Chapter 5 of its ‘Boom, Gloom and the New Normal’ eBook, co-authored with John Richardson. This looks in detail at the major changes taking place in demand patterns as the BabyBoomers (those born between 1956-70) enter the 55+ age group.

This cohort already includes 272 million people, 29% of the Western population, and it is growing every day.

The book argues that the over-55s simply do not need to buy new houses, or extend their present homes. Equally, they no longer want to buy new autos every few years. So it is hard to imagine that these key sources of chemical and polymer demand can recover to earlier SuperCycle levels.

Stimulus programmes and tax cuts cannot force people to buy things that they no longer need or want.

This seems plain common sense. But our discussions with central bankers and policymakers over the past few months have made it clear that this is not a consensus view, as the blog discussed recently.

Equally, the chapter highlights the very real financial problems facing the over-55s as they reach pension age. The chart above gives an example of the mountain that has to be climbed.

It is based on official US earnings statistics, starting from 1979. Over the period to the end of 2010, a worker on median wages would have earned a total of $811,096, and have a pension fund of $242k by the end of 2010 (purple line), based on the assumptions that they:

• Earned median wages from 1979 – 2010 (blue line)
• Saved a regular 10% of this income (red line), a total of $81110
• Achieved the average S&P 500 Index growth as a return on their investment each year.

This employee would have earned $39k in 2010 on median earnings. Yet their pension fund would provide an annual pension of only ~$10k/year, with inflation proofing.

Of course, no one chart can cover all circumstances. Some people will have managed to save more, and will have been more successful with their investments. But saving 10% of income each year is a stiff target. And US earnings are generally higher than elsewhere in the West.

Clearly a pension of $10k/year will not fund the prosperous retirement that most people are expecting. In turn, it provides another reason why chemical companies should assume that demand patterns will change in the West, as we transition to the New Normal.


'Peak oil' a theory, not a statement of fact


Oil supply is critical to today’s global economy. Now a new book by oil ex...

Learn more

Time for leadership at EPCA


The chemical industry has a turnover of $3.4trn, and is the world’s 3rd la...

Learn more
More posts
ACS Chemistry & the Economy webinar on Thursday

Please join me for the next ACS Chemicals & Economy webinar on Thursday, at 2pm Eastern Standard...

Polyethylene’s crisis will create Winners and Losers

Polyethylene markets (PE) are moving into a crisis, with margins in NE Asia already negative, as I h...

What’s next for Brexit and chemicals?

The UK is about to go to the polls again to try and decide the Brexit issue.  Chemicals will be one...

Global economy hits stall speed, whilst US S&P 500 sets new records

Whisper it not to your friends in financial markets, but the global economy is moving into recession...

Portugal shows the way to climate neutrality by 2050

“If you don’t know where you are going, any road will do”. The Irish proverb’...

The next billion phone users will be buying $10 smart feature phones, not $1000 iPhones

Smartphone sales plateaued in Q3, down 9% since Q3 2017’s peak of 1.55bn, as the chart shows....

Budgeting for paradigm shifts and a debt crisis

It is now 8 years since John Richardson and I published our 10-year forecast for 2021 in Boom, Gloom...

Paradigm shifts create Winners and Losers

MY ANNUAL BUDGET OUTLOOK WILL BE PUBLISHED NEXT WEEK Next week, I will publish my annual Budget Outl...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more