Demographics boosted demand, now drives savings

The blog is very pleased to have been invited to write for today’s Financial Times.
Its article looks at the influence of the Western ‘baby-boom generation’, born between 1946-70.
Typically, as in the UK, the period saw a 25% jump in the number of births compared to pre-War levels. Since 1970, births have fallen back to earlier levels.
The baby-boomers created a significant upswing in demand as they entered the key 25 – 54 year old cohort between 1970 -95. This age group dominates consumption, as they marry, buy houses and start families. Naturally enough, this demographic also helped to boost chemical demand – which is largely based on personal consumption.
But now, as the article notes, the majority of the baby-boomers are moving into the over 55s age group. Their need to consume is therefore reducing, and they are much more concerned with saving – especially as they have the longest life expectancy in history.
This demographic change in the developed economies is very significant for future demand. It is a major reason for believing that the post-Crisis period will be a New Normal, with lower consumption, less debt and higher savings.
If you would like to read the full article, which focuses on the possible impact of this change on interest rates, please click here.