The success of any marketing plan largely depends on how well it accounts for the business and the economic conditions that exist when implementing the plan. Therefore, as marketing leaders develop their plans for 2022, it is imperative that they assess the economic environment that is likely to be next year.
This assessment should include an analysis of various macroeconomic indicators and industry-wide data. At the macro level, most marketing leaders need to assess expected levels of economic growth, unemployment, consumer spending, business investment, and inflation. At the industry level, they should focus on the economic factors that will or may affect the demand for their company’s products or services.
Several organizations have recently released economic forecasts covering all or part of 2022, and I will describe some of these forecasts in this post. All the forecasts discussed here are updated regularly, so marketers should check them often to make sure they are working with the latest economic forecast.
real GDP growth
Most economists and other forecasters now expect the overall US economy to experience above-average growth in 2022. In September, US Federal Reserve members and Fed chairs predicted that US real GDP would rise by 3.8% next year (average individual expectations). in October, Conference Board He also estimated that real GDP would grow by 3.8% in 2022.
Several Wall Street economists are tracked by CNBC and Moody’s Analytics They expect GDP growth of 3.9% in 2022 (individual median forecast).
To put these forecasts into perspective, many economists believe that the maximum sustainable growth rate for the US economy (measured in real GDP) is 2% – 3%.
The unemployment rate in the United States has fallen dramatically since the pandemic spike of 14.7% in April 2020. Last month, it was 4.6%, According to the US Bureau of Labor Statistics.
Most economists expect the unemployment rate to continue to decline in 2022. For example, the Federal Reserve now estimates that the average unemployment rate in the fourth quarter of 2022 will be 3.8%. Conference Board The unemployment rate is expected to decline from 4.8% in the fourth quarter of this year to 4.1% in the second quarter of next year.
Consumer confidence fell sharply in August this year and remained low in September and October, according to the University of Michigan Consumer Confidence Index. Many economists attributed this decline in consumer confidence to the surge in COVID-19 cases in the summer and early fall due to the delta variable. In an October report, University of Michigan researchers noted that the continued low level of consumer optimism is primarily due to growing concerns about inflation.
Despite these downbeat readings on consumer confidence, most forecasters expect consumer spending to be strong next year. for example, Conference Board It expects real consumer spending to increase at annual rates of 4.2% in the first quarter and 3.5% in the second quarter of 2022. Deloitte expects real consumer spending to increase by 3.5% over the course of 2022.
Investing in a business
Historically, levels of business investment have been closely correlated with a CEO’s confidence about future economic and business conditions. This relationship bodes well for business investment in 2022. In McKinsey’s latest global survey of business executives, 51% of North American respondents said they expect economic conditions in their home country to improve over the next six months.
Conference Board It is estimated that “non-residential investment” will rise at annual rates of 5.0% in the first quarter and 5.2% in the second quarter of next year. For the full year of 2022, Deloitte expects “real fixed business investment” to grow 3.2%.
Taken together, these projections suggest that the US macro economy will remain in full recovery mode in 2022. If these forecasts are accurate, most B2B companies should operate in the coming year under generally favorable business conditions.
But there is a looming storm cloud that has recently become more and more anxious. . . inflation.
In the twenty-first century, inflation has been largely an unimportant issue for most businesses and consumers in the United States. From 2000 through 2020, the average annual change in the US Consumer Price Index (CPI) – the inflation rate – was 2.48%.
In contrast, the increase in CPI over the twelve-month period from October 2020 to September 2021 was 5.4% (all items, not seasonally adjusted), According to the US Bureau of Labor Statistics. The Federal Reserve has taken the position that this latest inflation will be “temporary,” but many economists are now arguing that higher inflation will be more persistent than the Fed expects.
The inflation now occurring is primarily driven by supply chain disruptions affecting a large (and growing) number of products. These supply disruptions lead to price shortages and price rises at the producers’ level. For the twelve-month period from October 2020 through September 2021, the US Producer Price Index (final demand, not seasonally adjusted) increased 8.6%, According to the US Bureau of Labor Statistics.
The Fed maintains (and many economists agree) that inflation will regress toward more “normal” levels in 2022. For now, the main uncertainty is when the downturn will begin soon and how far the inflation rate will fall. If inflation remains elevated for much of 2022, other economic indicators discussed in this post may be less positive than the latest forecasts suggest.
Image courtesy of Fertile Ground via Flickr (CC).