Although the Great Recession has hit Hispanics and Asians particularly hard, their buying power is expected to grow rapidly during the next several years, according to the annual minority buying power report from the Selig Center for Economic Growth in the Terry College of Business.
“Despite the recession, the underlying growth trends for Hispanics and Asians in the U.S. are still very strong,” said Jeff Humphreys, director of the Selig Center and the author of the report. “Minorities have a lot of economic clout, and these groups in particular are experiencing growth in buying power that greatly exceeds that of the general population.”
The percentage gains in buying power during the past decade have varied considerably by race and ethnicity: 108 percent for Hispanics; 98 percent for Asians; 69 percent for Native Americans; and 60 percent for African Americans. The study projects minority markets will continue to grow much faster than the majority market, where buying power increased by 49 percent during the past decade.
The report projects the combined buying power of racial minorities (African Americans, Asians and Native Americans) will rise from $1.6 trillion in 2010 to $2.1 trillion in 2015, accounting for 15 percent of the nation’s total buying power. The buying power of Hispanics, which are an ethnic group but not a racial group, will rise from $1 trillion in 2010 to $1.5 trillion in 2015, accounting for nearly 11 percent of the nation’s total buying power.
The report defines buying power as disposable income or money that is available for spending after taxes. Humphreys said the report provides businesses with a valuable planning tool for judging start-up or expansion opportunities and for tailoring advertising, products and media to individual market segments.
“The Hispanic market alone, at $1 trillion, is larger than the entire economies of all but 14 countries in the world-smaller than the GDP of Canada but larger than the GDP of Indonesia,” Humphreys said.
The Selig Center report projects that during the past decade, the nation’s total buying power rose from $7.3 trillion to $11.1 trillion, a 52 percent increase that far outstrips inflation. The report forecasts moderate growth beginning in 2010 and persisting through 2015. Total buying power in 2015 is projected to be $14.1 trillion, for an increase of 27 percent during the next five years.
The report notes the heavy concentration of Hispanics in construction and hospitality industries and the concentration of Asians in the manufacture of durable goods, such as automobiles, made them particularly vulnerable to job losses during the 2007-2009 recession.
From its peak in 2008, the number of employed Hispanics has dropped by 624,000, which signifies the loss of nearly 13 percent of the new jobs held by Hispanics created in the previous eight and a half years.
During the same time period, the number of employed Asians dropped by 288,000, which signifies a loss of more than 20 percent of the new jobs held by Asians created in the previous eight and a half years.
Yet Humphreys said that the outlook for buying power in both groups is positive. Hispanic buying power is expected to grow 50 percent in the next five years, from $1 trillion in 2010 to
$1.5 trillion in 2015. The report notes that the rate of growth in Hispanic buying power tops all other racial and ethnic groups as well as the rate of growth in overall buying power.
Favorable demographic forces are primarily responsible for the anticipated growth in Hispanic buying power, Humphreys said. Population growth is expected to continue, and the relatively young Hispanic population means that proportionally more young Hispanics are starting their careers and moving up their career ladders. Increased entrepreneurial activity and a rising level of educational attainment also illustrate the upward mobility of Hispanics, the report finds.
The Selig Center report notes the Asian population also is growing faster than the total population and is relatively young. As a group, Asians are much better educated than the average American and therefore hold many top-level jobs in management, professional and scientific specialties.
During the next five years, Asian buying power is expected to grow 42 percent, from $544 billion in 2010 to $775 billion in 2015.
“The Hispanic and Asian markets in particular are expected to grow at an exceptional rate,” Humphreys said. “For businesses, the message is you don’t always have to look overseas to find fast-paced growth.”