Are we in a Recession? Are we headed for a recession? Did we just blink and miss one? Most importantly, does it even matter? All questions we address in this first issue of Economic Pulse, a new monthly blog I’ll be authoring to help sort out our complicated economy and its impact on the local advertising marketplace. Let’s dive in!
On January 23rd, 2023, The Conference Board announced their Leading Economic Index decreased by 1% in December. The LEI is now down 4.2% over the last six months which is a continuation of recent signals that the US economy is headed for, or already in, a recession. Indications are that overall economic activity is likely to be negative in the near term, gaining steam later in 2023.
None of that sounds good, but has anyone told consumers yet?
Considering that consumer spending makes up nearly 70% of the US’s economic activity, consumer sentiment must be suffering if we are in or headed for a recession, right? No, it’s not a foregone conclusion.
GDP was up 2.9% in Q4 2022 (after being up 3.2% in Q3 2022). The Consumer Confidence Index increased very sharply (6.9 points) in December. Looking at the chart below, large drops have been indicative of recession. It’s also interesting to note that the start of the 2008 recession and 2020 recession both saw slight upward ticks in consumer confidence before nosediving.
While that could be what is happening here, it’s not likely. Unemployment is low, wages are up, and inflation is calming which, when combined together, many believe creates an environment where the recession we are in/beginning is relatively short and mild. But, on the other hand, is employment low because people are exiting the workforce? Are wages keeping up with inflation? It’s not very clear.
So, what does all this mean and how does it affect Local Advertising spending? There are signs consumers are splurging on big-ticket items while cutting back on everyday purchases due to fatigue after more than 14 months of hearing about and worrying about high inflation.
What verticals will benefit from this “split-brain budget” that consumers have right now? We’ll examine that in February’s Economic Pulse.
In the meantime, let’s stay connected! What are you seeing? What are you excited about? What are you worried about? Send me your questions and thoughts.
BIA’s Economic Pulse is a monthly quicktake on the state of the economy that we’ll publish on the last Monday of each month.