What Goes Up In a Down Economy

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What Goes Up In A Down Economy?

In 2018, more than 1 in 7 Americans were 3 or more months behind on their auto loan payments ー Could another recession be on the way?

The Economy Cycles Through Phases Bubble: Asset prices surge due to overzealous market behavior Burst: When costs get too high for investors, massive sell-offs begin When a Bubble Bursts, the Economy Takes a Downturn Recession: When the market trends down Depression: When that recession is particularly bad or long

What Signals a Down Economy?Interest Rate Spread/Yield Curve Compare long-term and short-term interest rates 一 If short term interest rates are higher, recession is likely In 1980, The Federal Reserve caused a recession by raising interest rates to combat inflation Initial Unemployment Claims Initial claims for unemployment insurance could be a leading indicator by assessing businesses that need to cut back on current spending In 1933, The Great Depression brought unemployment up to 25% ― and it remained above 10% until 1941 Residential Building Permits Housing construction can be affected by interest rates ― a common spark of recessions is the tightening of the Federal Reserve In 2007, The Great Recession was triggered when the subprime mortgage bubble burst and spread to the general economy Consumer Confidence Index (CCI) Consumer surveys about the current economic situation and expectations for the future have been useful for predicting economic downturns Consumer spending is the largest contributor to economic growth ─ Comprising 50-75% of GDP

Some things we're always ready to spend money on 一 even in a down economy

Exceptions to the Rule

Beauty Products In Europe, personal products outperform the broader economy by 100% Sector showed continued growth through each of the past 4 recessions During the Great Recession, outperformed the wider market by 45% US cosmetics sales increased through the past 3 recessions Alcohol Consumption of alcohol beverages stayed steady during the Great Recession Frequent excessive drinking of alcohol rose during that time US sales of alcoholic beverages rose almost $2 billion during the last recession 2008: $185.4 billion 2011: $187.2 billion Other vices like tattoos, cigarettes, tobacco, and candy also typically do well during downturns Health Care In the US, health care spending has grown every year since 1960* Following the Great Recession, annual growth in health care fell by ½ 2001-2003: +8.8% annually 2008-2012: +4.2% annually BUT health care spending still grew as a percentage of the US economy 2008: 16.6% of US economy 2009: 17.6% Non Cyclical Businesses Funerary Services Funeral services will always be in need, although the down economy may lead Americans to more cost effective plans Cremations, generally cheaper than traditional burials, are on the rise 2007: 34% 2012: 43% Taxes US accounting firms declined at a rate of .3% annually starting in 2008 BUT the job sector as a whole experienced growth 2008: +.1% 2013 +.5% Retail Between 2009 to 2015, the top 1% of families saw their income grow by 37% Meanwhile, the income of the other 99% grew by just 7.6% Retail trends look very different for the wealthy vs the majority of Americans Luxury Global sales of luxury goods rose by 10% just 2 years after the Great Recession By 2010, luxury apparel sales outperformed those of mass apparel Even after a recession, the very rich tend to get richer ― 2013 saw a record number of billionaires Discount In 2009, Wal-Mart sales jumped 5% while other retailers struggled More Americans are regularly shopping in thrift stores 2008: 14% 2012: 20% 2008-2012: Goodwill and the Salvation Army reported significant growth Information Technology Information technology jobs more than doubled over the past 3 recessions 1997: 2.2 million 2012: 4.0 million By 2019, 19 of the 50 top-rated jobs* in the US are tech-related

Lessons Learned

Your business doesn't have to be in a thriving industry to survive a down economy Monitor Spending Increased oversight can prevent overspending before it happens Enforce a Budget Limit non-payroll spending to 10% below the past year Manage Inventory Track consumption patterns and limit inventory to reduce overhead Never Stop Marketing A lean market brings an opportunity to distinguish yourself Master Core Competencies Focus on being the best at what your business already does well

Tech to Help Any Business Thrive

• Wave: An accounting software platform that tracks sales and expenses, manages invoices and customer payments, and creates accounting reports

• Gusto: This app makes your company's payroll, tax and benefits processes more efficient

• Shopventory: An inventory management system which tracks profit margins and spots sales trends between multiple locations

• Homebase: A management app that can build an employee schedule, track your team's hours, and manage labor costs in real time

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