The New New Consumer

Right before the credit crisis blossomed and world economic growth reached a crescendo I was busy telling anyone who would listen about the power of the emerging consumer globally. I argued that the shift in focus from export driven growth to domestic consumption led expansion would ultimately benefit those companies doing business in the BRIC economies and the so-called "Frontier" economies of the world. Boy was I wrong. At least at the time.

It seems an unrelenting wave of support for the domestic consumer is coming globally in the form of stimulus packages, monetary easing, and subsidies. Governments from Latin America to China are concentrating intervention efforts on refocusing economic systems on the burgeoning consumer populations. Countries which have historically born the fruits of foreign consumption by way of elevated exports are now being asked by both internal and external constituents to develop domestic markets, and quickly.  

In the case of China this means subsidizing purchases of white goods and developing the infrastructure needed to connect rural provinces with urban ones. This effort is showing up in the data as the country's exports have continued to decline even with an uptick in manufacturing activity. The expeditious manner in which the government's policy is being deployed is a harbinger for things to come in the remaining BRIC nations. For investors, this means companies benefiting from a surge in consumption in these markets stand to benefit greatly.

Unfortunately, the majority of ETF exposure available to these growing consumer markets for the investing public is heavily focused on the financial, telecom, and resource sectors. Resources such as oil will continue to be a large part of the consumer development in these markets, but investors must also consider individual companies whose market share and exposure to the BRIC markets are growing. For example the Asian white goods manufacturers with products best tailored to meet the needs of Chinese consumers are LG and Haier.  Those retailers with the biggest footprints in Asia are Bailan group and Gome.

In the end it will certainly require a sustained recovery outside the U.S. for this consumer story to truly take off. With that in mind, if economies such as China's are truly going to lead the world out of its economic malaise, China's stronger than expected quarter may be a wakeup call for investors. I have said it once and I will say it again, the time may finally be right to start betting on the new consumers of the world.  

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