U.S. Economic Overview: 2011 Update

On the surface, everything looks good, but there are still some institutional issues that will continue to create problems: jobs, housing, banking and public debt.

April 07, 2011

CHICAGO - As the industry??s premier benchmarking and analysis meeting kicked off, one presenter best summed up what the next day and a half means. "What drives the numbers is the customer," said Dr. David Nelson, founder and president of Finance and Resources Consultants Inc.

NACS Chairman Jeff Miller, president of Miller Oil Co., opened the NACS State of the Industry Summit, calling the annual event, "one of the best meetings of the year" and a unique chance for attendees to take back "actionable data."

"Last year we added a point to inside gross margin" after implementing ideas learned at the Summit, said Miller. And there was one word that defined up this year??s numbers: "more." More stores??more sales??more costs??more credit and debit card fees...more bifurcation between top performers and the rest of the industry ?" and best of all, more pretax profits.

As for the economy as a whole, Nelson said that there also is some good news. The U.S. economy has seen six straight quarters of real growth with gross domestic product.

The numbers from CSX, the industry??s largest operations and financial database, paints and even rosier picture. Subscribers reported that gasoline volumes were up 9.75 percent and in-store sales were up 6.78 percent.

But there are still plenty of concerns as the economy continues to recover from its most prolonged downturn in more than half a century.

Looking beyond raw employment numbers, Nelson said that LFPR ?" the labor force participation rate ?" is at 64.2 percent, the lowest level since the early 1980s.

In addition, fully 45 percent of those now unemployed have been so for at least six months. If we read between the lines, these are your customers because consumers comprise 70 percent of U.S. GDP.

Higher gas prices also are a concern as consumers find ways to cut costs. He said that Nielsen Analysts found that sustained higher prices would lead to trip compression, less eating out, more value-conscious shopping alternatives and more couponing. Plus, every $10 increase in a barrel of crude oil cuts economic growth by 0.2 percent.

The biggest problem areas, meanwhile, are related to housing, banking and public debt. The housing industry, Nelson said, will take at least until 2015 to come back.

Banking also has considerable challenges. On average, less that 10 banks a year fail. In 2009, 140 failed, and another 157 failed in 2010. This climate makes the lending environment less than enjoyable. Or as Nelson put it, "working with your banker is like a colonoscopy ?" you don??t enjoy it a bit."

As for the public debt climate, consider that it took the U.S. 224 years to accumulate $6 trillion in debt. In just the past 10 years, we have added another $8 trillion in debt. The end result is low private and national savings have created low net domestic investment. Nelson called this current climate a "travesty." These three issues are going to have to improve if we??re going to see a sustainable economic recovery.

Advertisement
Advertisement
Advertisement