In 2016, U.S. Hispanic buying power was larger than the gross domestic product of Mexico. That’s just one of the telling statistics that illustrates the unprecedented economic clout of U.S. minority groups in the latest Multicultural Economy Report from the University of Georgia Terry College of Business.
Published by the Selig Center for Economic Growth, the report estimates the nation’s total buying power reached $13.9 trillion in 2016 and predicts it will hit $16.6 trillion by 2021, with minority groups making the fastest gains. For example, African-American buying power, estimated at $1.2 trillion in 2016, will grow to $1.5 trillion by 2021, making it the largest racial minority consumer market.
Buying power is the total personal income of residents that is available for spending after taxes. It does not include money that is borrowed or saved from previous years. The Selig Center estimates its buying power statistics by applying economic modeling and forecasting techniques to data from various federal sources.
“As America grows more diverse, minority groups are reaping great economic dividends, and business owners would do well to pay attention,” said Jeff Humphreys, author of the report and director of the Selig Center. “Minority buying power is growing at a faster pace than the white consumer market for a number of reasons, such as demographics, increases in educational attainment and entrepreneurial activity.”
The report breaks down buying power by both racial and ethnic groups as well as by states and territories. The Asian and Hispanic markets are also segmented by country of origin. Population figures used in the study are taken from U.S. Census data, which counts every person regardless of immigration status.
The combined buying power of blacks, Asians and Native Americans is estimated to be $2.2 trillion in 2016, a 138 percent gain since 2000. The same time period saw the buying power of Asian-Americans grow by 222 percent, Native Americans by 164 percent and blacks by 98 percent. All of those markets are expanding faster than the buying power of whites, which increased by 79 percent.
More than one in six Americans claims Hispanic origin, which helps explain rapid gains over the past few years. From a buying power estimate of $495 billion in 2000, the group has increased its economic clout 181 percent to $1.4 trillion in 2016. That accounts for nearly 10 percent of total U.S. buying power in 2016 and means the U.S. Hispanic market is larger than the gross domestic product of Mexico and bigger than the economies of all but 14 countries in the world.
The report provides national buying power estimates for seven selected groups of Hispanic consumers, with Mexican-Americans representing the largest group and accounting for $797 billion worth of buying power, followed by Puerto Ricans, who account for $146 billion.
While each of these subset groups has a distinct purchasing trend, their growth has some things in common, Humphreys said.
“The most important trend in favor of Hispanic buying power growth is favorable demographics,” Humphreys said. “The Hispanic population is growing much more rapidly than the total population, thanks to natural increases and strong immigration. The population is also increasingly better educated and has increased its entrepreneurial activity.”
The Hispanic population in the U.S. is also very young, with 35 percent under the age of 18. This bodes well for increased economic prosperity in the future with proportionally more Hispanics either entering the workforce for the first time or advancing in their careers.
African-Americans constitute the nation’s largest racial minority market; however, the buying power of Hispanics (an ethnic minority group) is larger. Black buying power increased 98 percent from 2000 to 2016 and will comprise 8.8 percent of the nation’s total buying power in 2021, according to the Selig Center.
“We’re seeing many more African-Americans starting and expanding their own businesses, with the number of black-owned firms growing 34 percent between 2007 and 2012 alone,” Humphreys said. “African-Americans also continue to become more highly educated, which should allow proportionally more blacks to enter occupations with higher salaries.”
Asian-Americans make up 6 percent of the population and control 6 percent of its purchasing power. Since 2000, Asian buying power has grown 222 percent to $891 billion, the biggest percentage increase of any U.S. minority group. U.S. Asian buying power exceeds the entire economies of all but 15 countries in the world.
“The fast-paced growth of Asian consumers should create opportunities for businesses that pay attention to their needs and step in to serve niche markets,” Humphreys said. “What we can see from the data is that Asians tend to be better educated than the population as a whole, which boosts their earning potential.”
The full Multicultural Economy Report gives buying power estimates for 17 segments of Asian consumers in the U.S., including Chinese, Korean and Vietnamese. California is the largest Asian consumer market in the United States, but many states are seeing significant increases. In 2000, only six states had more than $10 billion in Asian-American buying power annually, but 18 states exceeded that mark in 2016, according to the report.