It’s not over folks

The Australian sharemarket — which has stayed at about the same level for much of February – shows that most investors are only too aware of the Abbott debt bomb campaign and the Tanner tendency to tell caucus that its plans for more cash splash are cactus. Unemployment and under-employment is still high (Roy Morgan estimates for January show unemployment at 7.5% (up 0.7% since December 2009) and total unemployment and under-employment at 14.7% (1.720 million).

Those who follow this crystal ball will note that it has been a little less cloudy and gloomy for the last couple of months following the recovery and heading into a period of renewal.

You will be aware that we monitor the views of thousands of consumers around the world to get an on the ground perspective rather than the rollercoaster view from the equities casinos. We also read the tealeaves from the gold bugs and Treasury bond rates to see the real time impact of feelings of unsurety in the market place.

Regrettably, we are now likely to be heading down the next double black diamond run of a W recovery rather than the super-optimistic picture painted by the volatility promoting, bonus hunting stock brokers peddling optimism. While there has been a V-shaped recovery to date, all the signs suggest that it’s not over folks (see Gary Morgan’s Weekly Consumer graphs).

Gary says that in Australia, the weekly Roy Morgan Consumer Confidence Rating (124.6, down 3.5pts) has fallen to its lowest level of 2010 after a strong start to the New Year – another sign that we are again at the top of the downward slope of the big dipper. Now is not the time to try fancy moves and big expansionary efforts without the safety net of a substantial venture capital support network.

Although confidence or optimistic responses across all five components of Consumer Confidence were virtually unchanged over the past week, increasing worry across all five components dropped appreciably for the first time since November 28/29, 2009.

“The increasing level of worry suggests that though Australians are aware of the sovereign debt problems plaguing Greece and other European countries, they are not feeling any direct impact from these issues and remain uncertain about how these problems will touch their day-to-day lives.”

Lynn Franco, Director of The Conference Board Consumer Research Center says that while US consumers last month were less dire about their income prospects than in December 2009, the number of pessimists continues to outnumber the optimists. Consumer Confidence rose for the third consecutive month, primarily the result of an improvement in present-day conditions. Consumers’ short-term outlook, while moderately more positive, does not suggest any significant pickup in activity in the coming months.

Assessment of consumer sentiment regarding business conditions, employment and personal income provides early warning of the coming business climate. Based on a representative sample of thousands of mail-in surveys, the United States’ Conference Board index has the largest pooling sample of any US measure of consumer confidence.

Consumer confidence levels are generally linked with consumer spending. For instance, when consumer confidence is on the rise consumer spending tends to increase. Low or falling consumer confidence on the other hand is typically associated with decreased spending and consumer demand.

Some analysts criticise the Consumer Confidence figure for its volatile tendencies and weak connection to household expenditure, turning instead to the University of Michigan Consumer Confidence numbers. However, this index also slipped in February, according to preliminary data. The index fell to 73.7 from January’s 74.4, dipping below the cyclical high hit in January. The expectations component of the index was responsible for the decline as assessments of current conditions rose in the month. Inflation expectations dipped from January. The volatility of the Consumer Confidence figure is attributed to two factors: its pooling size and the survey time frame focus.

The Conference Board surveys an entirely new group of people each month, resulting in more erratic month-to-month figures. Additionally, the survey queries respondents on expectations for the following six months, a relatively short-term evaluation. Conversely, the University of Michigan survey will re-poll many individuals and focuses on expectations for the next one to five years. The long-term focus has a stabilising effect on consumer confidence.

Consumers’ assessment of present-day conditions was, on the whole, more positive than last month. Those stating business conditions are “good” increased to 9.0% from 7.5%, however, those stating business conditions are “bad” increased to 46.1% from 45.7%. Consumers’ assessment of the labour market improved moderately; those claiming jobs are “hard to get” declined to 47.4% from 48.1%, while those claiming jobs are “plentiful” increased to 4.3% from 3.1%.

Consumers’ short-term outlook, while overall more positive, was somewhat mixed. The percentage of consumers expecting an improvement in business conditions over the next six months decreased to 20.9% from 21.2%, while those anticipating conditions will worsen increased to 12.7% from 11.8%.

Regarding the outlook for the labour market, those expecting fewer jobs decreased to 18.9% from 20.6%. However, those expecting more jobs to become available in the months ahead declined to 15.5% from 16.4%. The proportion of consumers anticipating a decrease in their incomes declined to 16.2% from 18.4%.

For those who missed this column last week, smart companies will need to follow the steps set out by the Futurist on Monday:

1. Massage the customer database to build better customer relationships with your long-term and loyal customers.
2. Make contact with business angels and venture capital
suppliers seeking growth enterprises.
3. Establish cross-cultural and cross-border networks that
extend your business into emerging markets.
4. Explore opportunities to value-add on your current range
of products and services.
5. Develop rapid response capacity to new marketing efforts of your competitors (eg. the current liquor store campaigns).
6. Go beyond your circle, especially if it is family and friends, to find new customers.
7. Create an opportunities register out of customer queries.
8. Use the new social marketing media to build brand presence.
9. Join industry and business alliances that extend your reach.
10. Build your emotional resilience and watch out for pressures and stress fractures in the OH&S environment.

As stated before, the hot tip for smart companies is to batten down the hatches by ensuring that only those costs that cannot be reduced are held at current levels for their best customers, slightly increasing prices for specialist services for casual customers and training and retaining sales teams that are out and about in a very difficult market place for the first half of the year and one that is likely to get much worse after the inevitable election season.

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Dr Colin Benjamin is an entrepreneurship and strategic thinking sonsultant at Marshall Place Associates which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship.

Email dr.colinbenjamin@marshallplace.com.au
Contact: CEO Dr Jane Shelton, Phone +61 3 9640 0099