Which Consumer is Strong?

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The State of Chinese, German and U.S. Household Finances

It’s a rare moment when Rhode Island … can crow about being larger than just about anywhere. But there is at least one such place, and it, Luxembourg, is a whole country. Not only can Rhode Island brag about being bigger, it can also brag that it can be traversed in a significantly shorter drive-time than is possible for the tiny country. In theory, you should be able to cross the minuscule landlocked Grand Duchy’s 998-square miles which are snuggled between Belgium, France and Germany in a short two hours. On the way, stop to take in the picturesque vineyards by the Moselle River in the East, the valleys of the dense Ardennes Forest to the north where the Battle of the Bulge once raged, and in its beautiful center, sweet villages filled with the castles and farmhouses for which it is famous. If, however, you’re all about getting gnarled in the mother of all logjams, try spending that same two hours commuting in and out of Luxembourg City as 175,000 cross-border workers do, albeit, not for fun.

The good news is, if you’re one of 1.2 million tourists who visit the country every year, your trip expenses just lightened up. Beginning March 1st, all public transport in Luxembourg will be on the house, as in gratis. You might think this is all about easing that congestion. Not so. It is true that in the past 40 years, Luxembourg’s population has grown by roughly 250,000, which is saying something considering that brings it to 625,000. The growth of the labor force has been even more remarkable, surging to 427,000 in 2018 from 161,000 in 1998, driven (literally) by a 168% rise in cross-border workers. More than 60% use their cars to commute. If you include company cars registered to non-residents, little Luxembourg has the highest density of cars per inhabitant in all of the European Union (EU).

Despite the fact that less than a fifth of Luxemborgers use public transportation for traveling to and from work, free transportation is not a green scheme. As per François Bausch, Luxembourg’s minister for mobility and public works, “It is primarily a social measure. The objective is to stop the deepening gap between rich and poor. For people on low wages, transport expenses matter. Therefore it is easier to make it free for everyone.” Is “free” so critical? After Qatar, Luxembourg is the world’s wealthiest nation. But that can’t take away from a good portion of this wealth being tied to phantom investing – think transactions passing through corporate shells with no meaningful influence on the economy and its population’s financial health. It’s no secret the country it’s a well know tax-haven. Authorities are duly investigating the most egregious violators. Still, at nearly €2,000 per month, Luxembourg also boasts the highest minimum wage in the EU. And the nation has the globe’s highest saving rate, poised to hit 18.1% in 2020.

In this series endeavoring to explore the short and long-term effects of the Coronavirus, the next logical step seemed to be to study the state of the three biggest exporters’ households who will be most directly affected. While we hear of the U.S. that “The Consumer is Strong” ceaselessly, despite retail sales and any number of other metrics rolling in recent months, it is worth asking who among China, Germany and the United States has the strongest consumer and best able to withstand what is, or might not, be to come.

 

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence

For a full archive of my writing, please visit my website — www.DiMartinoBooth.com

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