Macro Insights: Demographics is destiny

DESTINY: The saying goes that ‘demographics is destiny’ and this is an increasingly important and predictable driver for investors. Latest global population forecasts show dramatic changes even just over the next few years (see chart). With economic growth in essence just population plus productivity per person, this is important stuff. Population growth is slowing, populations aging, and life expectancy extending. This is a drag for many economies in Europe and north Asia but supports trends from healthcare to automation. Whilst a potentially big demographic dividend is on the table for India and Africa, helping outlook from infrastructure to commodities.

DIVIDEND: A ‘demographic dividend’ of a strongly rising working age population can be a big economic benefit if well used. This requires the education and infrastructure support to generate jobs and drive productivity. This is the challenge in Africa and India, which is set to overhaul China as the world’s most populous nation next year. Australia and Canada also benefit from more open immigration policies. This supports much of emerging markets (EEM), commodities (DJP), and consumption from white goods to cars (@AutoIndustry), as purchasing power rises.

DEFICIT: By contrast much of north Asia and Europe faces a large demographic deficit of both falling and aging populations. China’s population is set to decline under the lagged impact of its one-child policy, with the risk it gets old before it gets rich. This piles pressure on healthcare and pension systems, puts a focus on immigration and productivity solutions like automation, and drives investment growth for areas like financial wellness (insurance) and experiences (cruises).

All data, figures & charts are valid as of 04/08/2022