Do You Remember “It’s the Economy Stupid!”?

Way back in 1992, then campaign manager James Carville for candidate Bill Clinton hung a sign over his desk to have his staff focused on what the election was all about… the Economy. The rest is history.

After talking to several banks about the current economic situation, if there were three things I could share with you about the Economy, it would be:

1. We will experience a modest recovery that has already begun and we will not see growth in GDP exceeding 3% in any given quarter or year for the next couple of years.

Gross Domestic Product

The implication is that for a company to really grow they have to be smarter about their business than they have in the past because they will get little lift from the overall economy.

2. A major reason for this slower growth is a higher U.S. Unemployment Rate is expected for the next several years.

Unemployment Rate Forecast

This will have a significant downward effect on disposable income in the Economy so although consumer spending, which represents 70% of the United States GDP, will increase, it will probably be directed more to “necessities” verses “niceties”. Pricing and merchandise mix will be critical for merchants as well as ensuring consumers can easily find and buy a merchant’s products and services.

3. The U.S. Personal Savings Rate will continue to be higher than it has been in the last decade.

Personal Savings Rate

So even though the Economy is in rebound, and unemployment will decline modestly, the consumer is not confident enough yet to really spend so they will opt to save, taking more disposable income out of the Economy and less dollars for merchants to capture.

Overall, the situation is better than what we saw in the latter half of 2008 and all of 2009 but nothing to write home about. As a merchant, it will be incumbent upon you to figure out how to do more with less and in all likelihood technology will play a role in that process.

John Healy, CEO

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