Retail Observer

RETAILOBSERVER.COM DECEMBER 2018 32 I want to devote this month's column to an exercise in education rather than by making predictions. After a series of keynote presentations at conventions last month, it was clear that my audiences were curious about how they can look up numbers and make their own determination about our economic future. So here is a primer on the U.S. economy in 650 words. When I create the statistics for my keynote speech on the U.S. economy, I use what are commonly called Leading Economic Indicators. These include consumer confidence, consumer spending, GDP, inflation, interest rates, housing and the unemployment rate. These seven key topics that you can easily search online, will help you assess the directions of our economic future. Most of my presentations are summaries of how consumers are feeling about their economic situation and how willing they are to spend disposable income in your stores. The consumer is the center of our economy, and predictions are based on their behavior. These indicators are important because they are inextricably linked to the current nine-year expansion in our economy. Full employment, for example, is the starting point for inflation and is thus connected to the Federal Reserve's monetary policy of raising rates in boom times and lowering them when we see signs of a looming recession. All of the people who have attended my seminars and speeches over the years know that I am a numbers guy. I use the BLS statistics on unemployment, monthly job creation and the participation rate. It is clear that America is the largest consumer market in the world, and full employment plus robust wage growth drives 73% of total GDP in our country. Keeping an eye on employment will give you great insight into your prospects for growth over the next twelve months. Another indicator I recommend you use is the current price of a barrel of oil. We have seen a spike in the cost of gasoline recently, and this can be a forewarning of darker times globally, especially when you combine it with declines in currency values among Third World countries and emerging markets. India has been impacted by this phenomenon, and because the cost of oil is dollar-denominated, they have to pay off loans and buy oil with a rising dollar. The Wall Street Journal reported that the cost of crude oil in India has risen 39% in the past year. This is leading to a slowdown in the global economy and could be a harbinger of our future. I get asked a lot about the stock market in these very volatile times, and as I write this article in late October the Dow has been very unpredictable. In the words of Alan Greenspan, "Markets tend to take the stairs up – but the elevator down." As of this writing, the Dow has lost 1400 points in just a few days. The stock market is said to be forward-looking, because it predicts outcomes for the economy. I get this question often, "What information do you use in making stock market predications?" There are three very consistent outcomes that drive share prices: corporate profits, companies exceeding revenue projections, and positive guidance into the next quarter of the year. If you see these three variables in positive territory, then most of the time, most stocks will rise. Go to Market Watch and follow the companies you like during earnings season and look for trends; it will give you a leg up on making money in equities. If you are an investor, the CBOE Volatility Index, or VIX is a great tool. I wrote last time about the importance of the yield curve in predicting slowdowns, and don't forget to look at global markets, as the world today is very interconnected. So there it is, a short guide to how an economist views this very crazy world. ECONOMIC PRINCIPLES MADE EASY Joe Higgins Economic Viewpoint RO Joe Higgins—with more than 44 years in the appliance industry—speaks at conventions, seminars and sales meetings across America. His work includes presentations on the United States economy, leadership, and creating a high-performance culture, healthy teams, and customer service. Visit www.q4qwithjoe.com.

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