It's difficult to understand why food inflation would cause riots in
Egypt ... until you realize Egyptians spend 40% of their earnings on
food. It's hard to believe a housing bubble and high energy prices
could take down the U.S. economy ... until you realize that Americans
spend half our paychecks on housing and transportation.
Consumer spending maps tell us more than how we spend. They reveal the DNA of an economy. The following graphs compare how U.S. consumers spend money versus Egypt and members of the fast-charging "BRIC" group -- Brazil, Russia, India and China. All charts courtesy of the Credit Suisse Emerging Consumer Survey, except for the final image that is pulled from the Bureau of
Labor Statistics. In particular, pay attention to the food columns. U.S. consumers spend one of every ten dollars on nourishment. Developing countries spend as much as five times more on food.
The Chinese save more than 30% of their earned income and use another
20% of their earnings on food. This helps explain why rising food
prices create such a challenge for Beijing. If China's currency
appreciated, families could buy more food with more valuable money ...
but this would also make Chinese products more expensive for foreigners, slowing this
Key Stat: Brazil's
savings rate is among the lowest in the developing world, where
families save more to insure against illness and disaster. Credit card
balances increased 30 percent in Brazil between 2008 and 2009, as the
country races to join the global middle class. If there is a credit crisis building in the developing world, Brazil could take the hardest fall.
political crisis began with an economic crisis. When you exclude savings, food accounts for half of Egyptians' disposable income. Global food inflation hit the country hard -- especially considering Egypt's household income is on pace to shrink dramatically in the next 12 months
Key Stat: India
suffers from 13% inflation, one of the highest rates in the world --
and half of that inflation comes from higher food prices squeezing
families who spend one of every four earned dollars on food.
Key Stat: Again, the story is food. Russia's drought has spelled disaster for many of its families who spend a third of their salaries on nourishment. The price of cereals and flour is up 70% in Russia since 2010.
Key Stat: Americans spend a lot on our homes and cars
. Housing and transportation accounts for more than half of
consumer spending, according to the Bureau of Labor Statistics. That helps to explain why high oil prices combined with a housing bust in 2008 threatened to bring down the U.S. economy. To see
a more colorful and detailed breakdown of US spending, see this chart
from Visual Economics, which I've included at the bottom of this post.
USA: DEEP DIVE
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