Millennial vs. Generation X spending power in South America: Peru
Peru is defined as an upper-middle-income country by the World Bank. The country had an annual average spending power per capita of $7,603 (in 2011 PPP) by the end of 2018. Market Pro provides insights concerning spending power segments and age cohorts for every country in South America. The different spending power segments for the following analysis are the Extremely Poor, those who live on less than $1.90 per day, the Poor who live on $1.90-$5 a day, the Vulnerable living on $5-$11 per day, the Middle Class segment on $11-$110 per day, and the Rich on $110 and over. Millennials refers to the generation born between 1980 and 2000, and the preceding Generation X refers to those born between 1960 and 1980.
Millennials in Peru
Millennials are expected to increase their numbers in the Peruvian rich segment by 74% by 2028. At the same time, they will shrink by 2% in the middle class segment. Currently, Millennials represent 35% of Peru’s middle class. Due to demographic trends and an overall shift toward the rich class, this share will drop to 28% in 2028. However, even though more Millennials are entering the country’s rich segment, their overall share in this segment will decrease from 38% to 29% over the same time span.
The next decade
By the end of 2018, there were 223,000 rich people in Peru with a spending power of more than $110 per day. Over the next ten years, this number is expected to more than double to almost 508,000 individuals. The Peruvian middle class, earning between $11 and $110, by far the biggest segment of the country, is also forecasted to grow by 21% to almost 24 million people by 2028. While the middle class and rich segment of Peru are expected to expand, the poor segment (spending less than $5 a day) and the vulnerable segment (daily spending between $5 and $11) of the population will see a decrease of 26% and by 15% respectively over the next ten years.
The reason for this decrease is the massive increase of 189% in numbers of Generation X members (born between 1960 and 1980) in the rich segment, leading to an increase of their share from 26% currently to 33% in 2028. This trend goes hand in hand with 20% and 35% drops in the numbers of Generation X members in the poor and vulnerable income groups, respectively.
What does this mean?
Overall, the country is getting wealther but spending power over the next 10 years will be driven primarily by Generation X given their massive increase in the rich segment. Research analysts, corporate managers, and market researchers should take note of this significant development and realize that the oldest members of this age cohort will be senior citizens by 2030.