Economic experts keep waiting for the predicted recession that never seems to begin. Most still put the odds at 50/50 whether or not our economy will recess or ride out of this mess on the unicorn more commonly known as a “Soft Landing”.
The latest economic news we’ve received is extremely mixed. On the one hand we have a jobs report where unemployment increased, but consumer spending remained strong.
So what’s happening? Are we in a good economy or bad one? The answer, depending on your perspective, is a Tale of Two Very Different Economies.
There seems to be a major split in sending between the Upper and Lower Classes.. People with money are spending it like a sailor on leave.
Most of the Upper Class still have mortgages in the 2% range and have money invested in a stock market that continues to soar. Why would these people economize? Stocks like Norwegian Cruise Lines are flying based on their earnings because people with money can’t wait to go on vacation.
This is happening while the lower classes are getting hit hard by inflation. A recent statistic showed that the average family of four has seen an $11K per year increase in their grocery bill over the last three years while their earnings haven’t come close to compensating for that change.
Of course they’re cutting back. The Campbell Soup Company just cut their future earnings outlook and the stock price tumbled.
So if you’re wondering why the economy hasn’t recessed, please thank your clients who have money. Normally they’re the first economic subset of consumers to stop spending.
But this time, given the pandemic and the months they spent in houses aggravated about not being able to travel, they’re continuing to drop coin. Hopefully it will be enough to stop the eight hundred pound gorilla also known as our economy from recessing into in a Siberian Winter.
Let me leave you with this.
Please take what I just said seriously.
I do monthly financial statements for all sorts of companies with all sorts of product and service mixes. Those that specialize in selling to the upper classes are doing well, while those that don’t frankly aren’t.
Please realize that we’re in a sort of alternate universe. Normally, when our economy tightens, companies like Campbell’s Soup would do much better than any cruise line.
But this time things are different.
We’re Entrepreneurs, the masters of our fate. We can make changes that will shape and improve our futures.
Take a solid look at your product and service mix. If you can change your mix to emphasize that which would be more appealing to those with money, then I’d get to it. Maybe you change your advertising and marketing to emphasize higher end offerings.
Either way, those with disposable income haven’t stopped spending while those without are cutting back. Please manage your businesses appropriately.
If you have questions or need help with your accounting and tax issues, please don’t hesitate to contact us.
We’re all going to get through this. Let’s get through it together.
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Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
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