Can Asian spending close the gap?

Here is an interesting piece on LVMH - the monster luxury goods conglomerate. While the Economist initially starts out with a love fest for Monsieur Arnault's concern, they also point out some weaknesses in the business model and get to a nifty bit of data. 45% of the revenue for the fashion an leather goods comes from Asia. That's roughly €1.35B in revenue (H1 2009) and in the one part of the world that seems to be doing okay right now. The question for me is not whether one should discount LVMH's sales potential due to a generational shift in preferences in part of that business. Rather does this part of the world, which has been saving voraciously, have the muscle to get us over the confidence hump in the consumer discretionary segment? In an earlier article there is some convincing evidence that this may be the case.

Here is where I turn pessimistic. From the second article they point out that Chinese consumer spending has dropped from 46% of GDP to 35% of GDP in the last year. Imagine what would happen if that kind of fall off occurred in the US. Assuming no growth in other sectors GDP would fall 25%. For China the same conditions would cause a 17% dip in GDP. I believe other segments of the Chinese economy can make up part but not all of the loss. I don't believe that of the US. Which leads to two questions. Is China really doing as well as their official GDP statistics? Many people suspect they are manipulated - I don't see how they can't with that level of slowing in activity. Second, is the US consumer really in that much pain considering the decline we have experienced? Is it just a slight slackening where people are buying a Honda Civic instead of a Hummer? Still buying but buying for quality and price. The consumer has not slipped that much as a proportion of GDP.

It seems that ever since the industrial revolution visions of selling chopsticks and other products to the perceived potential of the Chinese consumer market have been as successful as military control in Afghanistan. There is some hope, but I think this area will only provide the spending boost by comparison to a lack of spending from their North American counterparts who have some massive de-leveraging to complete and are toning down their purchases.