The buying power of Hispanics — now the nation's largest minority group — will exceed $860 billion in 2007 and is whizzing its way to more than $1.2 trillion five years from now, according to an annual report on minority buying power released Tuesday by the Selig Center for Economic Growth at the University of Georgia's Terry College of Business.
Tracking a similar course, African American buying power will total $845 billion in 2007 and is projected to top $1.1 trillion by 2012 — a 34 percent increase over the five-year period.
Americans of Asian ancestry, representing the third largest minority group, will see their purchasing power grow almost as fast as Hispanics over the next five years. Asian buying power is forecast to grow 45.9 percent, versus 46.3 percent for Hispanics. In dollars, Asian buying power will total $459 billion in 2007, rising to $670 billion by 2012.
To Jeff Humphreys, director of the Selig Center and the report's author, it doesn't matter which number you choose, they all point to the same conclusion: The growth is impressive and it's becoming an increasingly important segment to consumer industries that are looking to tap into minority markets as a source of revenue growth.
"In 2007, the Hispanic consumer market in the United States is about the same size as Mexico's entire economy — in terms of its GDP (gross domestic product). The same can be said for the size of the African American consumer market," Humphreys said. "And I'm becoming convinced the Asian market in America is reaching the point of critical mass, where their economic clout in a number of urban markets is going to create great opportunities for businesses to pay attention to their needs."
The Selig Center's annual report includes state-by-state projections of buying power for the nation's three most populous racial groups (African American, Asian and American Indian), as well as Hispanics, who are categorized by the U.S. Census as an ethnic minority and not a racial minority. Buying power, also referred to as disposable income, is the total personal income available for spending on goods and services after taxes. The state-by-state projections are broken down by market size, growth rate and market share.
The steep curve of Hispanic buying power is largely the result of immigration and population growth, Humphreys said. The 2000 U.S. Census reported that about one person out of eight living in the United States was of Hispanic origin. By 2012, that population figure is projected to approach one out of every six.
Hispanic buying power has risen from $212 billion in 1990 (the beginning boundary of the Selig Center study) to $862 billion in 2007, representing growth of 307 percent over that time. By comparison, the combined buying power of all non-Hispanics in the United States grew 125 percent during the same period.
Other notable insights from this year's report include:
- Total annual buying power in the United States, combining all racial categories, will exceed $10 trillion for the first time in 2007. According to Selig Center projections, it's $10.006 trillion, to be exact.
- The gains in black buying power reflect more than just population growth and consumer inflation, Humphreys said. He also pointed to the increasing number of blacks who are starting their own businesses. As evidence, he cited Census data released since his last buying power study that showed the number of black-owned businesses increased 45 percent from 1997 to 2002, far exceeding the 10 percent increase in the overall number of U.S. businesses. Black buying power grew 165 percent from 1990 ($318 billion) to 2007 ($845 billion). That compares with 134 percent growth in disposable income for the total population.
- In 2007, the Asian population in the United States will represent 4.6 percent of the total, and Asian buying power will also account for 4.6 percent of total buying power. But the Asian population, and therefore its spending, is more concentrated geographically than other racial markets. The five states with the largest Asian consumer markets account for 60 percent of all Asian buying power. They are California ($150 billion), New York ($44 billion), New Jersey ($29 billion), Texas ($29 billion) and Hawaii ($21 billion).
- Currently, only three minority markets at the state level exceed $100 billion in buying power annually, and two of them are in California. Hispanic buying power comprises $228 billion in California. In Texas, Hispanic buying power totals $154 billion, followed by California's Asian market at $150 billion.
- The share of buying power controlled by African American consumers will rise in 47 states, with the largest market share increases coming in Mississippi, Maryland and Georgia. They also represent the states where black consumers account for the largest share of the total: Mississippi (24.3 percent), Maryland (22.2 percent) and Georgia (20.8 percent), along with the District of Columbia (30.6 percent).
- Buying power for American Indians, the smallest of the four minority groups included in the Selig Center report, will total $57 billion in 2007 and rise to $77 billion in 2012. Native American buying power in 1990 was $19.7 billion. That projects to 190 percent growth in buying power from 1990 to 2007, which exceeds the estimated growth rate for U.S. buying power as a whole (134 percent) over the same period. But Native American buying power will account for only 0.6 percent of all U.S. buying power in 2007.
- Georgia is now the 10th largest Hispanic market in the United States, at $13.6 billion for 2007, compared with its 1990 rank of 19th. But the black consumer market in Georgia, estimated at $58 billion for 2007, still far exceeds the size of the Hispanic market. The state's black consumer market has grown to the nation's third largest in size — behind only New York ($78 billion) and Texas ($63 billion) — compared with its 1990 rank of seventh largest. Asian buying power in Georgia is estimated to have grown 624 percent between 1990 ($1.1 billion) and 2007 ($8.1 billion). That impressive growth rate is the third fastest in the country, surpassed by only Nevada (848 percent) and North Carolina (654 percent).
Available for purchase from the Selig Center as a pre-packaged book and CD, "The Multicultural Economy" estimates minority buying power by applying economic modeling and forecasting techniques to data from various U.S. government sources. The model developed by the Selig Center integrates statistical methods used in economic forecasting with those of marketing research.
In addition to the state-by-state breakdowns, the 2007 report also projects minority buying power for all metropolitan areas and counties in Georgia and Florida.
The Selig Center for Economic Growth was established in 1990 in memory of Atlanta entrepreneur Simon S. Selig Jr., a 1935 Terry College graduate, by his son, Steve Selig, and daughter, Cathy Selig, both of Atlanta. The Selig Center also publishes the college's annual "Georgia Economic Outlook" forecast and produces commissioned studies for the state and the private sector.