WORLD POPULATION SEGMENTS
MILLIONS, 1950 – 2030 (F)
Population growth used to be about how many babies were being born. But not today.
Instead, it is being driven by the increasing life expectancy of the BabyBoomers – those born between 1946 – 70, as the chart shows:
- The number of babies born after the end of World War 2 increased exponentially
- There were 1.33bn Under-25s in 1950, when records began, and 3bn by 2005
- As the number of Under-25s grew so, in due course, did the number of those aged 25-54
- These Wealth Creators created an economic Super Cycle from the mid-1980s
- They were all settling down and buying houses, cars etc for the first time
The scale of the increase was vast. There were 914m Wealth Creators in 1950 and 2.6bn by 2025.
This increase explains why economic growth was so strong in the 1980s-2000s. Vast numbers of Boomers were growing up and creating new demand.
But today, that is no longer true. The population is still increasing. But the main source of population growth is now due to people living longer.
A whole new generation is alive for the first time in history, the Perennials 55+. There were just 291m in the Perennials 55+ cohort in 1950. Today, they number 1.7bn. And there will be 1.9bn of them in 2030.
In terms of economic activity, they already own most of what they need. They are not having babies.
They aren’t creating new demand. Instead they are essentially a ‘replacement economy’, replacing things as these get worn out.
POPULATION GROWTH IS NOW ABOUT LIFE EXPECTANCY, NOT BABIES
US HOUSEHOLD SPENDING 2000 v 2023
BY AGE OF HOUSEHOLD HEAD, $2023
The US is the world’s largest economy, and its official data confirms what has been happening, as the chart shows:
- There were 65m Wealth Creators in 2000, and 67m in 2023
- By contrast, the number of Perennials rose by 25m over the period, from 36m to 61m
And their spending patterns were very different. The Wealth Creators were spending $87k per year, whilst the Perennials were only spending $69k.
CHINA IS A POSTER-CHILD FOR THIS IMPACT
2 stories from last week’s media highlight the results of these developments.
China, as noted here before, is growing old before it grows rich. One in 5 of all Chinese are now 60+.
And today, the government is starting to wake up to the implications. But as always, it is only taking small steps, such as the news last week that it is introducing “silver trains”, as the Financial Times reports:
“China will launch a network of “silver trains” for elderly tourists as part of a plan to unleash the spending power of one of the world’s fastest-ageing populations. An official action plan released on Tuesday by several government departments outlined the need for trains outfitted with medical and old-age services. By 2027, a network of such trains should cover the entire country, officials said.”
A national train service for older people is a nice idea, but it isn’t going to change the underlying trend.
CHINA’S PROPERTY CRISIS IS GETTING WORSE, NOT BETTER
The second media story covered the growing crisis in China’s property market.
China has just had the greatest property bubble in history. Prices in the Tier 1 cities reached eye-popping multiples of 50x earnings. By comparison in New York, they peaked at 14x in the subprime bubble.
This is obviously bad news for those who bought at the top. As Bloomberg’s chart shows, prices are now down by 30% from their peak. Already, the crash has destroyed $18tn of household wealth.
And the dynamics of the market have also changed due to the ageing population:
- In the past, demand would have eventually recovered as more Wealth Creators needed a first home
- But in today’s Perennials economy, most people already have a home and so properties remain empty
2024 sales were already back at 2010 levels, when the bubble was just getting underway, as the chart shows. Sales outside the Tier 1 cities are even worse.
Living longer should be a great opportunity for all of us. Today’s problem is that policymakers around the world have refused to accept that demographics are destiny. All of us now have to face the challenge of unwinding the mess they have made.