The Emerging Market consumers were going to dazzle the global investor as they indulged their retail dreams buying everything from designer tee shirts in Brazil to convenience store goods in Russia and cars in China.
However, the MSCI index is still down 20% since 2007.

Currently there isn’t much fundamental reason in the near term to be optimistic about consumer spending in emerging markets or most global markets.

A spreading dynamic is responsible for the sober outlook.  Central Bankers have hiked interest rates to defend their depreciating currencies, reducing the willingness of consumers to borrow to buy goods and services.

The impact of higher interest rates is likely to be most pronounced and protracted in countries that run current account deficits; they are more vulnerable to the slack in global demand for commodities that is flowing from China’s economic slowdown.

Affected countries include Brazil and Turkey where consumer credit growth seems poised for a very sharp slowdown.  Russia, where the consumer stock index has fallen over 25% so far this year, is the worst emerging market performer.  A sharp hike in interest rates to defend the ruble is likely hit consumer spending in the coming weeks.