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Study shows what makes someone middle class

Wednesday, 31 Jul 2013 | 2:22 AM ET
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The middle class: it's the world's biggest consumer group and its growing spending power should push global consumer spending up by nearly a third by 2020, according to market research firm Euromonitor.

So, what does it mean to be a middle class consumer?

A study released this week by Euromonitor defined "middle class" consumers as those with a household income in the range of 50 percent below a country's average annual gross household income and 100 percent above a country's average.

While consumer spending in developed markets grew by 2.6 percent annually in the five years to 2012 and should remain low through 2018, emerging markets consumer spending saw double-digit growth of 10.4 percent annually in the same period, Euromonitor said in its survey of 6,600 middle-class consumers in 16 developed and emerging markets.

"The past few decades have seen explosive growth in the middle class in emerging markets, as shoppers with new levels of disposable income are ready to spend and are optimistic about their future," the study said.

(Read more: Why rich consumers will dominate spending in 2013)

About 26 percent of respondents in emerging markets said they intend to increase their overall spending in the next 12 months, while only about half that percentage plan to do the same in developed markets.

Most developed countries have been hurt by weak economic growth in recent years, prompting a change in shopping habits among the middle class, Euromonitor said.

"Regionally, the middle class in the U.S. and Asia-Pacific are prioritizing savings most strongly at 50 percent plus. At the same time, Asia-Pacific respondents are twice as likely as the middle class in other regions to plan to increase their overall spending - 30 percent versus less than 15 percent," Euromonitor said.

Asia leads in consumer confidence: Nielsen
Vishal Bali, Managing Director, Consumer Insights business at Nielsen says consumers are more optimistic in Asia.

Key trend

One key trend among today's middle class consumer is that they are "overwhelmingly" well-educated and higher studies are a key priority among the group, Euromonitor said.

"Nearly two thirds report holding at least a bachelor's degree, if not higher levels of education at 19 percent, especially in emerging markets," Euromonitor said. "Along with high levels of education, the majority of middle class consumers at 55 percent hold a full-time job, working at least 35 hours per week. Another 15 percent are self-employed."

An increase in disposable income from higher education leading to well-paying jobs has left middle class consumers with "with enough income to spend on necessities and more left over to spend on small and large indulgences alike," the report said.

Spending priorities

Holiday travel topped the list of middle-class spending priorities in the next 12 months.

According to the survey, 50 percent of respondents cited travel as a top spending priority, compared with 40 percent who cited savings and 30 percent that listed apparel.

(Read more: Chinese overtake Germans as biggest spending tourists)

Other spending priorities include money spent on a vehicle and paying down debt, at 28 and 27 percent respectively.

"Two or more automobiles are typical in Australia, France, Mexico, Spain and the U.S., while the majority of middle class households in China, Japan, Russia and Turkey own only one car," Euromonitor said.

(Read more: Bargains, not product still spurring electronics sale)

Consumer electronics are also a key area of spending for many middle class homes, especially those of "millennials" - born after 1980, the research firm said.

Watching television, browsing online and emailing are among the top five activities in middle class homes. More than 20 percent of middle-class consumers said they planned to spend on electronics in the next 12 months, Euromonitor said.

—By CNBC.com's Rajeshni Naidu-Ghelani; Follow her on Twitter @RajeshniNaidu

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