Spending shifts that shape our world

By Robert Plummer
Business reporter, BBC News

Credit cards can take a pounding at this time of year

As the annual seasonal shopping frenzy takes its toll on your credit card, remember: consumerism is for life, not just for Christmas.

The festive season is hugely important to retailers, for whom Christmas trading can represent as much as 60% of annual turnover.

But over the past 10 years, there have been huge shifts in the types of goods that we buy - not just during the annual bout of present-giving, but all year round.

FAST-GROWING UK GOODS Photography: +244% Telephones: +243% Games & toys: +205% Bags & accessories: +188% Outdoor sports: +174% Medical equipment: +147% Bicycles: +111% Furnishings: +111% Wines: +107% Tools: +105% Source: Management Horizons Europe

And although economists routinely hail high-spending US consumers as the main engine of growth in the world economy, it turns out that their British counterparts have upped their expenditure at almost the same rate.

US consumer spending went up by 70% between 1995 and 2005, but UK shoppers spent 68% more during the same period, according to research by retail strategy firm Management Horizons Europe.

The firm's chairman, Edward Whitefield, says spending in both countries has been fuelled by the rise in cheap imported goods such as clothing and footwear from China, India, Bangladesh and Turkey.

"These have enabled these two Western economies to keep inflation down, at 22% over this 10-year period, but also to spend money in other directions," he says.

Cameras and phones

And those "other directions" are in line with the big technological changes that have taken place since the mid-1990s.

There are 10 product sectors of the UK economy that have at least doubled their sales in the past decade.

Kodak has been struggling to adapt to the digital age

The highest-performing sector is photographic equipment, which went up by 244% and is now worth nearly £5bn a year.

"That reflects the huge explosion in sales of digital cameras," says Mr Whitefield.

"That's been a trauma for companies like Kodak, which has had to change its production lines and stop making film. But at the same time, there's been enormous growth in colour printers for the home."

Mobile phones are another sector that has shown healthy growth, with a 243% increase.

Both product categories have also increased in value in the US, by 105% and 415% respectively.

The new economy

But the most spectacular US growth has been seen in services, rather than goods, with internet service providers showing a 950% rise since 1995.

"If you look at total annual consumer spending in the UK, it's about £720bn, with half coming from goods and half coming from services," Mr Whitehead says. "But in the US, 55-65% comes from services.

Online gambling is one service that has failed to cross the Atlantic

"The online economy has shown phenomenal growth in the US, with companies such as Google, Yahoo and eBay. In particular, eBay has built up to an annual turnover of $6bn in the last six or seven years."

One service that the US government is not at all keen to allow online is gambling.

New US laws forbid firms from taking internet bets and ban banks and credit card firms from allowing web payments.

UK companies such as Partygaming and 888 Holdings have suffered as a result. But US firms have done extremely well out of casino gambling, which grew by 167% between 1995 and 2005.

"Casinos have been a real money-spinner for them and they don't want anybody stealing their business," says Mr Whitehead.

Winners and losers

The past 10 years have been good for UK retailers such as Vodafone, Argos, Jessops and the Majestic wine chain, which have seen increased demand for their core products.

Financial services, too, have shown considerable growth on both sides of the Atlantic, with banks continuing to do well.

SLOW-GROWING UK GOODS Footwear: +46% Jewellery: +44% Soft drinks: +40% Tobacco: +36% Home appliances: +35% Food at home: +32% Newspapers: +14% Stationery: +11% Musical equipment: +11% Postage: -0.7% Source: Management Horizons Europe

But there have been losers as well as winners since the mid-1990s.

The internet-based economy has had a big impact on old-fashioned methods of distributing information, with newspapers in the UK growing by just 14% and stationery suppliers reporting an 11% rise in spending.

Postage was the one sector that actually declined, by 0.7% - which goes some way to explaining the British government's recently-announced plan to close 2,500 post offices by 2009.

In the US, there is confirmation of the car industry's woes, with the burden falling disproportionately on Detroit.

Spending on new foreign cars increased by a below-average 69% between 1995 and 2005, but spending on new domestic cars went up by just 7%.