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Over the Next Year, Germany Will Hit a Scary Demographic Milestone

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In Europe, the economy is humming along at its fastest pace in 10 years.

According to the European Central Bank, the most recent forecast for the eurozone pegs growth at 2.3% for the year ahead, a significant upgrade from the central bank’s previous estimate of 1.8%.

But as Europe regains its economic mojo, a key part of the machine is seeing demographic reality take shape.

A Scary Milestone

It’s been no secret that Germany, which has a reputation as the economic engine of Europe, is in a troubling demographic predicament. With one of the oldest populations in Europe, and a low fertility rate of just 1.5 births per woman, it is only a matter of time before the rubber hits the road to affect growth in the country.

That time may be finally creeping in, and the country is poised to hit a dubious milestone in the next year that really crystallizes concerns around the demographic composition of Germany’s population.

By 2019, there will be fewer Germans under 30 years old than there are Germans that are 60+ years:

This ratio is certainly extreme on a global level – after all, 24.4% of the world population is under the age of 14, and only 12.3% is older than 60 years.

However, it’s also pretty extreme in comparison to other developed countries. The U.N., for example, recently estimated that the 60 and older population made up an average of 22.1% of the total for all high-income countries.

Conversely, the last time the 60+ group made up the same proportion in the German economy was in 1997.

A Closer Look at Germany

For a closer look at this trend, here’s an animated and interactive chart of Germany’s population pyramid. Notice that by 2020, the shape starts to represent the negative population growth pattern that we showcased in a previous post.

Use the “lock” button to save an imprint of particular year, and then use the play button to animate future years.

Visualizing Negative Growth

With more people in the 60+ age bracket than in the younger generation, it’s inevitably a prelude to population decline in the native population.

Here is this negative growth projection shown, using a more conventional graph:

German population growth

Based on these United Nations projections, the German population is likely to decline by over 10 million people as we move towards the end of the 21st century.

This is a stark contrast to other parts of the world, such as the booming megacities in Asia and Africa, that will soon dominate the world’s future demographic landscape.

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Cities

The 8 Ways Urban Demographics are Changing

These pivotal trends show how urban demographics are aiding in the transition to a very different economic and investment landscape.

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The 8 Ways Urban Demographics are Changing

Cities are what keep the global economic machine humming.

Over 80% of the world’s economic output is derived from activities in cities – and more specifically, it’s estimated that 60% of GDP growth occurs in just the top 600 urban centers.

Given the above, it’s fair to say that the destiny of humankind is directly linked to what happens in major cities. Further, how urbanization plays out over time could end up having a significant ripple effect on the economy, and we should pay close attention to such trends.

Urbanization 2.0

Today’s infographic comes to us from Raconteur, and it showcases eight different ways that urban demographics are evolving.

Below we will summarize the changes, along with potential impacts on the economy:

1. A Higher Percentage of Urban Dwellers

Between 1950 and 2018, we went from 30% to 55% of the world’s population living in cities. This has been driven largely by today’s middle and high income economies in places like North America, South America, Europe, and Japan.

The next stage of urbanization will see us move to 68% – more than two-thirds of the world’s population – living in these urban conglomerations. It will be driven by countries in developing markets, creating a potent investing megatrend along the way.

2. The Countries Driving Growth

It’s estimated that three countries will combine for 35% of all urban population growth.

RankCountryGrowth in Urban Population (2018-2050)% of Global Urban Growth
World860 million people35%
#1India416 million people17%
#2China255 million people10%
#3Nigeria189 million people8%

In total, there will be 2.5 billion more urban dwellers in 2050 than there are today. Many of these people will experience rising incomes in cities, increasing the global middle class to an unprecedented size.

3. Peaking Rural Populations

On the flipside, it appears the world’s rural population has nearly flatlined, with anticipation that it will peak in absolute terms in the next couple of years. Rural populations have been slowly growing since 1950 until this point.

4. The Rise of Megacities

There will be 43 megacities by the year 2050, which is more than quadruple the amount that existed back in 1950.

The changing geography of the world’s megacities will be one of the major forces that shapes the future of the global economy and accompanying investment trends.

5. New Population Centers

By 2050, more than 70% of the world’s urban population will live in Asia or Africa. Meanwhile, North America and Europe will combine for closer to 15% of that total.

6. De-Urbanization

The role of de-urbanization is often downplayed or forgot about when discussing urban demographics, but it is an interesting issue.

Factors such as falling fertility rates, economic contraction, and natural disasters are actually shrinking the size of some cities. In fact, McKinsey predicts that 17% of cities in developed regions will see a drop in population between 2015-2025.

7. Disparities in Urban Growth

The rate for urban population growth is actually trending down across all types of economies – however, these rates come from very different starting points.

High income countries are currently averaging growth of less than 1% per year, and this will continue to decline to below 0.5% per year by 2050. Over the same time period, low income nations will go from 4% to 3% per year.

8. Changes in Average Age

The age distributions in large cities within developed nations will begin to skew older, something we’ve shown previously when looking at the median age of every continent.

The biggest impact here may be felt on dependency ratios in the workforce. With a smaller pipeline of new workforce entrants and a burgeoning population of seniors, this changing ratio is one of the most significant stories impacting urban demographics.

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Chart of the Week

How the Modern Consumer is Different

We all have a stereotypical image of the average consumer – but is it an accurate one? Meet the modern consumer, and what it means for business.

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How the Modern Consumer is Different

How the Modern Consumer is Different

There is a prevailing wisdom that says the stereotypical American consumer can be defined by certain characteristics.

Based on what popular culture tells us, as well as years of experiences and data, we all have an idea of what the average consumer might look for in a house, car, restaurant, or shopping center.

But as circumstances change, so do consumer tastes – and according to a recent report by Deloitte, the modern consumer is becoming increasingly distinct from those of years past. For us to truly understand how these changes will affect the marketplace and our investments, we need to rethink and update our image of the modern consumer.

A Changing Consumer Base

In their analysis, Deloitte leans heavily on big picture demographic and economic factors to help in summarizing the three major ways in which consumers are changing.

Here are three ways the new consumer is different than in years past:

1. Increasingly Diverse
In terms of ethnicity, the Baby Boomers are 75% white, while the Millennial generation is 56% white. This diversity also transfers to other areas as well, such as sexual and gender identities.

Not surprisingly, future generations are expected to be even more heterogeneous – Gen Z, for example, identifies as being 49% non-white.

2. Under Greater Financial Pressure
Today’s consumers are more educated than ever before, but it’s come at a stiff price. In fact, the cost of education has increased by 65% between 2007 and 2017, and this has translated to a record-setting $1.5 trillion in student loans on the books.

Other costs have mounted as well, leaving the bottom 80% of consumers with effectively no increase in discretionary income over the last decade. To make matters worse, if you single out just the bottom 40% of earners, they actually have less discretionary income to spend than they did back in 2007.

3. Delaying Key Life Milestones
Getting married, having children, and buying a house all have one major thing in common: they can be expensive.

The average person under 35 years old has a 34% lower net worth than they would have had in the 1990s, making it harder to tackle typical adult milestones. In fact, the average couple today is marrying eight years later than they did in 1965, while the U.S. birthrate is at its lowest point in three decades. Meanwhile, homeownership for those aged 24-32 has dropped by 9% since 2005.

A New Landscape for Business?

The modern consumer base is more diverse, but also must deal with increased financial pressures and a delayed start in achieving traditional milestones of adulthood. These demographic and economic factors ultimately have a ripple effect down to businesses and investors.

How do these big picture changes impact your business or investments?

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