Consumers trying to keep their budgets balanced will be dismayed to find that keeping up with the Joneses is getting pricier as the global middle class expands.
Economists generally consider the middle class to be those consumers with enough financial resources to make discretionary and small luxury purchases—such as an automobile or concert tickets. By that broad brush, about 2 billion people worldwide qualify, said Jack Plunkett, chief executive of Plunkett Research.
By 2030, that number will balloon to 5 billion, with many of the newcomers hailing from developing countries such as India, China and Brazil.
Collectively, consumer spending in Brazil, Russia, India and China accounted for 8.1 percent of global gross domestic product in 2010,according to IHS Global Insight. By 2015, it is expected to reach 12 percent. U.S. consumption as a percentage of GDP peaked at 22 percent in 2002, and by 2015 is expected to be roughly 14 percent.
That emerging middle class pushes prices higher, simply because there are more people vying for resources. Rising wages, which help create a middle class, also inflate prices because goods are more expensive to produce, Plunkett said. "The long-term effect is going to be pretty dramatic," he said.
Consumers are likely to notice first—and may have noticed already—on basic expenses such as groceries and gasoline.
"When people get a higher income, they want to eat more meat," said Chris Christopher, an economist with IHS Global Insight. Prices for a pound of ground chuck are up 20 percent over five years, according to the Bureau of Labor Statistics, while whole chicken is 28 percent pricier over the same period.
In some cases, surging demand contributes to temporary shortages. That has happened recently with Chinese demand for baby formula, and a few years ago with global demand for rice, said Teri Gault, chief executive of TheGroceryGame.com.
The effect of the new middle class isn't limited to staples. It has even pushed the needle on more luxury items such as designer fashion and premium alcohol. Commodities including diamonds and gold have also been affected, although global economic woes have put a temporary damper on the trend, said Plunkett.
Diamond prices are as much as 2 percent lower in 2013,due to reduced demand from India and China, according to brokerage firm ConvergEx.
U.S. consumers may also find themselves playing second fiddle to the emerging middle class in developing countries. Those first-time buyers provide a unique opportunity for manufacturers of everything from automobiles to cell phones to lock in brand loyalty, Christopher said. "Major corporations are taking notice of the global consumer rebalancing," he said. "They'retrying to maximize sales."
That's likely to mean more products designed with that audience in mind, or that debut abroad before arriving in the United States. In 2011, Dell, for example, launched its XPS 14Z laptop in China a month before it arrived stateside. "This is unheard of before," he said. "It's a pretty strong shift."
—By CNBC.com's Kelli B. Grant. Follow her on Twitter @KelliGrant.
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First published August 6 2013, 7:44 AM