Finding The Hidden Middle Class In Developing Countries

Here's a tip for U.S. companies scanning the globe for potential customers: There are far more middle-class consumers in emerging countries in Asia and Latin America than most studies indicate, reports the Futures Group Inc., a consulting firm based in Connecticut.

Rather than relying on dollar exchange rates to gauge income levels overseas, Futures Group analysts use so-called purchasing-power-parity methods developed by economists at the World Bank and the U.N. These methods factor local prices of nontraded goods and services, such as housing, utilities, and health care, into their income measures.

The results are eye-popping. China's per capita income is $400 as measured by exchange rates, but approaches $2,500 on a purchasing-power basis. Similarly, India's per capita income jumps fivefold, to $1,250, while Mexico's doubles, to $7,000. And whereas fewer than 3 million Chinese are middle class in the sense of earning $10,000 to $40,000 a year when measured by currency exchange rates, their ranks soar to some 80 million when purchasing power is used as the yardstick.

Purchasing-power measures, claims the Futures Group, can help identify large groups of potential customers by casting light on disposable income available for purchases. And that's exactly what U.S. exporters are interested in.

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