Going Up for the Rebound

by Alexia Bailey

Anirban Basu
Chairman and CEO
Sage Policy Group, Inc.

For marketers, data is essential, and not just data on our prospects and customers.  We need to have an understanding of the overall economy and the forces that influence buying decisions.  Anirban Basu, Chairman and CEO of Sage Policy Group, Inc., gave a lively and information-packed presentation at Wednesday night’s DMAW annual meeting.  Though I can’t hope to reproduce the rich data, or his sense of humor, here’s an overview of the session.

The good news is that things are getting better, albeit not as fast as we’d all like.  The global economy has been growing for four years now, though growth has slowed to 3.2%.  Developing countries will have the most growth, with US projected growth at about 2%.

In terms of the 2012 S&P performance, the financial sector had the strongest growth, up 23.5%, but the second biggest gains were in consumer discretionary spending, at 19.9% growth.  So, there is money out there to be spent or donated.

Despite our habit of expanding debt, we haven’t really been punished by the markets.  And at this point, literally none of the states are in recession.  Most are recovering, with about 2% growth.  And three states are even expanding – Texas, Alaska, and North Dakota.  What do they have in common?  Oil.  Nationwide, energy and natural resources are the biggest drivers of growth, and Basu says that by 2020, the US will be the #1 oil producer, and China the #1 consumer.

Contrary to some of the discussion we heard during the presidential campaign, America is actually a nation of producers, rebounding since June 2009, including the resurgence in the auto industry.  At least, until Q4 of 2012 broke the spell with -0.1% growth.  Basu attributes this to factors like defense spending cuts, adjustments to inventories, and the “wait and see” attitudes of consumers, and businesses that depend on them, to the fiscal cliff and other crises.  But, again, the markets had a big yawn at the news of the Q4 numbers, with a less-than-expected impact.

Next we looked at the job market, which has steadily grown over the last few months.  Professional and business services are up the most, then health services, then supply chain, then leisure & hospitality.  Much like the strong performance of consumer discretionary spending – those Coach bags – this category shows there is money out there, and people willing to spend it.

A funny thing about consumer confidence:  It was down in January, but consumer spending went up anyway.  It seems we take our anxiety and anger and channel it into retail therapy, keeping restaurants, malls, outlet stores, and car lots busy.  But even here lie contradictions – wholesalers like Costco are up (9.8%), indicating bargain shopping, but so is the luxury goods category (7%).  Record low interest rates are boosting both car and housing sales, as consumers sense it’s smart to buy now rather than risk a rate increase.

Overall, leading economic indicators are trending in the right direction.  Basu predicts that the first half of 2013 will continue to be soft, with spending power down, but that the Fed will continue to support the markets with low interest rates.   And if the problem in Q4 of 2012 was indeed about “wait and see,” the second half of 2013 could actually be better than anybody thinks.  Remember, consumer confidence is a “lousy leading indicator.”

So what’s a marketer to do?  It’s up to us to keep the consumer engaged, to support the economy!

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Alexia Bailey is Senior Sales Executive at Relevate, a leading provider of comprehensive data marketing solutions. She can be reached at abailey@relevategroup.com.