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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?

Learn from History: What Goes Up, Must Come Down

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

What will you do to stay on top of a down economy?

What Goes Up in a Down Economy

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