Business models have to change as BabyBoom dividend ends

Economic growth

SHARE THIS STORY

Perstorp May15

Major change is underway in the global economy:

  • Global GDP has grown 10-fold over the past 60 years; life expectancy has risen by 20 years; average time in education has risen from 3 yeas to 8 years; 70% of the world now has access to the internet
  • Today, the scale of technological change means 40% of existing job categories are likely to disappear over the next 20 years; climate change and inequality are moving up the political agenda;  the trend towards globalisation is reversing, political risk is rising, and we are moving towards a more fragmented world

This was the analysis presented by the former head of Britain’s MI6 secret intelligence service, Sir John Sawers, to investors at the annual EuroMoney Global Bond Investors Conference.

Of course, we can disagree with parts or all of his analysis, but it would seem unwise to ignore it completely.  He argued that complacency was one of the greatest dangers that we faced.  And he suggested that investors and companies needed to accept that complexity and uncertainty will be with us for the foreseeable future:

“It would be most unwise to simply keep our heads down, and assume today’s problems will somehow disappear.  Instead, business strategy needs to focus on the key issues, and develop relevant scenarios to prepare for whatever may happen”.

I have spoken at the EuroMoney Conference in the past (click to see my interview), and share Sir John’s concerns.

One key issue is “Why did this remarkable development take place in the global economy over the past 60 years?”   The answer has to be the unprecedented change that took place in global demographics, with the arrival of the Western BabyBoomers after WW2 – the largest and wealthiest generation that the world has ever seen.

Now we are leaving behind this demographic dividend, and moving into a world of demographic deficit, due to the collapse of fertility rates around the world.  We have relatively fewer people in the peak income and spending 25 – 54 age group.  Instead, for the first time in history, we have a whole generation of people in the low-spending, lower income 55+ age group – and they have 20 years or more life expectancy ahead of them.

The Swedish company, Perstorp, kindly invited me to discuss this outlook with their guests at their Grand Opening for their new OXO plant in Stenungsund.  And afterwards, we filmed a short 2 minute interview, where I discussed the highlights of my analysis.

Please click here if you would like to see it.

WEEKLY MARKET ROUND-UP
My weekly round-up of Benchmark prices since the Great Unwinding began is below, with ICIS pricing comments: 
Brent crude oil, down 41%
Naphtha Europe, down 41%. “The market remains divided on the outlook for demand from downstream European and Asian petrochemical industries”
Benzene Europe, down 41%. “The market in Europe is likely to slow down over July and August due to the holiday season,”
PTA China, down 31%. “Bearish sentiment remained in the market for the months of July and August, as producers do not see any upticks in demand for PTA”
HDPE US export, down 19%. “Export prices remained stable, though there were sources who reported spot prices slightly lower.”
¥:$, down 20%
S&P 500 stock market index, up 6%

PREVIOUS POST

US jobs participation rate at 37-year lows

03/07/2015

Yesterday’s US jobs report showed people are continuing to exit the work...

Learn more
NEXT POST

Oil markets begin to slide as Great Unwinding resumes

07/07/2015

Oil prices have fallen around $5/bbl, since my suggestion last week that a ̶...

Learn more
More posts
Global chemical industry – key trends for success in today’s New Normal
02/08/2020

The chemical industry is the best leading indicator for the global economy. On Friday, I had the pri...

Read
Oil prices signal potential end to the V-shaped recovery myth
26/07/2020

Oil prices have moved into another ‘flag shape’ – which previously provided critic...

Read
Bankruptcies now the key risk as hopes for V-shaped recovery disappear
19/07/2020

Governments, financial markets and central banks all originally assumed the Covid-19 pandemic would ...

Read
Merkel warns of need to prepare for No Deal Brexit
05/07/2020

Most people missed the fact that last Tuesday was the last possible date to delay the UK’s exi...

Read
World moves from Denial to Anger, as the Paradigm of Loss moves forward
07/06/2020

I have been warning about the Covid-19 risk since early February, and in April suggested here that: ...

Read
The New Normal for global industry
31/05/2020

The global chemical industry is the third largest sector in the world behind agriculture and energy,...

Read
Debt, deflation, demographics and Brexit set to challenge London house prices
17/05/2020

London property websites haven’t used the word “reduced” for many years. But it...

Read
The bill for two decades of doomed stimulus measures is due
03/05/2020

The Financial Times kindly made my letter on the risks now associated with central bank stimulus the...

Read

Market Intelligence

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

Learn more

Analytics

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