Vision - January/February 2009 - (Page 6) The economisT AnAlYZinG FutuRe tRends need subtitle ] • [ by author ] • [ by Shawn G. Dubravac, cPa the time of this writing, consumer spending in the third and fourth quarter was set to see the worst decline in nearly 30 years. As they have done in the past two recessions, consumers made stiff cuts in discretionary spending. Discretionary spending—unlike spending on nondiscretionary items like housing and food—easily can be delayed, and when faced with economic hardships, consumers opt to delay purchases of these nonessential goods. Durable goods that typically have longer life spans and include things like washers and dryers, vehicles, and home furnishings—are often the hardest hit. As the figure below shows, through September, discretionary spending on a year-over-year basis was flat and likely dipped into negative territory in the final months of the year. This indicates consumers actually spent less on nonessential items in the last few months of 2008 than they did a year-ago. B 2009 Worse than 2008 Three Things Your Company Can Do Dave Cutler/Images.com0 Year-over-year Change in Discretionary Spending y all accounts, 2008 was a in 2008. With this came a collapse in the In the face of this, consumer spending on tough year. The meltdown stock market which registered the worst 12 technology held up well through the first that began with the subprime months of returns since the Great Depres- nine months of the year, growing nine mortgage market implosion in sion. CEA projects the unemployment rate percent while other sectors foundered. As a percentage of durable goods purchases, August of 2007 moved quickly will continue to rise throughout 2009. During this time, U.S. consumers lost consumer spending on technology has throughout the entire financial system. Overall economic growth as measured more than $7 trillion in stock market never been higher, suggesting consumers by real GPD declined in both the third and wealth. Coupled with an additional $4 tril- made cuts elsewhere before lowering their fourth quarters of 2008 and is set lion in wealth lost from over a 20 spending on technology. Vehicle production to decline again in the first quarter percent slide in real estate prices for example, is as low as when the U.S. was of the New Year. CEA’s current estiexperienced since the housing mar- coming out of the early 1990s recession. mate suggests the economy grew ket peaked in 2006. The result: one Despite solid growth through the first nine 1.4 percent in 2008—driven almost of the greatest losses of wealth on months of the year and strong momenentirely by strong net exports. By record. Economists estimate for tum heading into the holiday season, CEA most estimates, 2009 will be worse every dollar decline in wealth, con- projected muted growth for technology as than 2008. CEA currently projects Shawn G. DuBravac sumers cut spending an estimated the broad economic slowdown eventually benign economic growth of a mere four to eight cents. During the cur- spilled into the technology sector. 0.1 percent for all of 2009—well below the rent episode, consumers have held true to The outlook for consumer spending theory and cut spending significantly. At remains bleak for 2009 with CEA’s projecalready weak growth the U.S. experienced in 2008. Economic growth over the two-year period of 2008 and 2009 marks the slowest growth over any two-year period since the Reasons for Cutting Back Holiday Expenditures early 1980s. 2007 2008 While the economic deterioration accelerated in September and October by precipitous drops in the stock market, the economy clearly has been deteriorating since late 2007. After adding nearly three million net new jobs in 2006, the U.S. economy cut well over a million jobs Increased cost of living 67% 75% Concerns with the economy 55% 74% Don’t have the money 59% 64% Earning less money 43% 34% Source: CEA Market Research, 2008 6 January/February 2009 www.ce.org http://www.ce.org
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