Morgan Stanley
  • Research
  • April 21, 2021

A Tale of Three Consumers

Morgan Stanley Research compares the three largest consumer markets – US, China, and Euro area/United Kingdom – to highlight the different ways they will drive the global recovery.

To help put the global consumer into perspective, private consumption represents 56% of GDP in the world's major economies, and has been a major driver of the global recession and expected robust rebound.

The three largest consumer markets, United States (US), China and the Euro area (EA) / United Kingdom (UK), account for nearly 60% of global private consumption. Comparing and contrasting consumption patterns in these regions can provide useful insights into how the expansion might unfold in the years to come.

Consumer's Road to Recovery

The speed and magnitude of the consumer recovery in the three largest consumer markets will hinge on three major factors:

  • Vaccine distribution and COVID-19 containment
    The US and UK have led the way on the vaccination front. In the US, the vulnerable population is set to be fully vaccinated by the early second quarter of 2021 and vaccines will be made available to the entire US adult population by May 2021. The UK remains on a similar track. The EA lags behind, with a target of vaccinating 70% by the end of the third quarter, but this requires a pickup in the vaccination rate. Better COVID-19 containment has accelerated the China recovery, and the government plans to ramp up vaccinations in coming months.

  • Size and composition of excess savings
    In 2020, the savings rate spiked across all three economies. In the US, the savings rate averaged over 20% in 2020, compared to 7.6% in 2019, with even higher savings moving into 2021. Meanwhile, the savings rate peaked at 24.6% in the EA and 26.5% in the UK in the second quarter of 2020. China's savings rate, already elevated, increased a lesser 4 percentage points in 2020. China and the US, with the greatest excess savings, are expected to have the strongest consumer rebound, followed by the EA and UK.
    Notably, the ratio of debt to financial assets in 2020 compared to 2019 declined in all three economies. This contrasts with what happened to household balance sheets in Europe and the US during the global financial crisis, when debt to financial assets rose roughly 5 percentage points. This is a critical point when comparing the ability of the consumer to recover with full force.

  • Labour market recovery
    The share of services consumption in each economy is reflected in their labour market composition and drives how employment was impacted by the lockdown. According to Morgan Stanley Research forecasts, China should have the fastest return to pre-COVID unemployment of around 5% in 2021. In the US, the unemployment rate is forecast to come down to 3.9% by the fourth quarter of 2022 from the current rate of 6.2%. Both the UK and EA should end the fourth quarter of 2022 with unemployment above their pre-COVID levels.

A Strong Global Rebound

Leading up to the onset of the pandemic, these major economies were experiencing many late-cycle benefits. The unemployment rate sat at relatively low levels in each economy. In particular, the US and UK were plumbing multi-decade lows, with the EA reaching its lowest rate since the financial crisis. Wage growth was on an upward trajectory in the EA, UK, and US, and gaining momentum in 2018-19.

Healthy consumer balance sheets and excess savings across all three economies should fuel a strong consumer recovery. While consumers may be more cautious after the recession and save more in the recovery, fiscal policy activism and pent-up demand in all the economies could lead to a strong global rebound.


For more on global consumption, or to read the full article ‘Global Consumer in the Driver's Seat’ (19 March 2021), speak to your Morgan Stanley financial adviser or representative. Plus, more Ideas from Morgan Stanley's thought leaders.