The increasing size and power of cities in emerging markets have tangible and dramatic economic benefits that translate into rising incomes. We expect to see one billion more people in cities worldwide become members of the consuming classes, with enough income to buy the very basic necessities and to have some discretionary income to spend on consumer goods and services. That's a rise of 70 percent from today. These growing consumer classes will drive rapid growth in demand for many goods and services. Across all large cities, we expect annual household consumption to rise by more than $20 trillion to 2025 – of which about $14 trillion will be in large cities in emerging markets. In the Emerging 440 along, we see consumption increasing by more than $10 trillion.

The growth in demand for many consumer goods will exceed the expansion of the consuming classes for two main reasons. First, household incomes are rising faster than the number of households and individuals in consuming classes. Second, and more important, higher shares of the populations of many large emerging economies, including China and India, are moving into incomes segments where the consumption of many goods and services takes off rapidly (Exhibit E4). In China, for instance, spending on dining out starts to take off at annual incomes of around $3000 per household and, by about $9000, is on a firm and steep upward trajectory. Spending on transport and communications starts increasing strongly as incomes reach around $6000 per annum. The recent growth in Chinese consumer markets reflects these inflection points. Between 2004 and 2011, per capita sales of electronics and video appliances rose fourfold and clothing and shoes rose fivefold in real terms, outpacing a 3.4 times increase in per capita income during that period.

Eoin Treacy's view At Fullermoney, the evolution of the global disposable income class has been a constant theme for the last decade. The commodity complex was among the first stock market sectors to benefit from this trend and will remain an important theme as demand for ever more infrastructure continues. However, consumer oriented shares have assumed the mantle of leadership over the last 18 months. Global brands continue to increase their footprint in the world's economic growth centres as hundreds of millions of more people can now afford their products.

As people are lifted out of poverty and into the middle classes demand for just about everything increases. Companies offering low cost consumer goods have been some of the primary beneficiaries and the fact that a considerable number are completing decade long ranges is testament to the importance of this theme as well as the considerable medium-term upside potential for such shares. (Also see Comment of the Day on July 30th for a review of packaged food providers.