The US consumer accounts for 16% of total global GDP, with a value of $10trn. By comparison, total Asian consumption is under $5trn. China’s consumption in 2008 was just $1.6trn, about equal to the UK. Changes in US consumer behaviour are therefore critical to global GDP, and hence to chemical demand.
The chart above, from the ACC weekly report, shows the dramatic change that is taking place in US consumer behaviour. Taken from Federal Reserve data, it shows that total US consumer debt has fallen by $114bn since its peak of $2.561trn in 2008. The big shift is in credit card and other revolving debt, which has fallen by $100bn over the same period.
This represents a major shift in behaviour. As the chart shows, consumer debt actually rose slightly during 1990-94, when the economy last suffered a major downturn. Since 2008, however, the consumer has been paying down debt at the rate of 5% pa (blue line).
Similarly, US household debt peaked at $13.854trn in Q1 2008, and has since fallen each quarter to total $13.536trn in Q4 last year. This represents the first fall since records began in 1946.
This is further evidence for the blog’s recent White Paper argument that we are moving towards a ‘new normal’. It suggested that all major downturns are periods of transition, from one set of priorities to another. In the ‘new normal’, the consumer reduces debt levels, as now seems to be happening, and focuses more on ‘needs’ than on ‘wants’.
In turn, of course, this means that underlying growth in chemical demand will be lower than in the 2003-7 Boom years, just at a time when all the new capacity commissioned in those years starts to come online.