The Mighty U.S. Consumer: Expect Increased Demand in the Year Ahead

The Mighty U.S. Consumer: Expect Increased Demand in the Year Ahead

Manufacturers' challenge: Be ready to handle the increased business efficiently and profitably.

Consumer spending is the largest and most important segment of the U.S. economy. The good news is that the U.S. consumer is alive and well. IndustryWeek readers will be benefiting from healthy consumer demand through 2013.

The next five to six quarters will see increased consumer demand for nondurable goods. Consumer-nondurable-goods new orders for the last 12 months are a record-high $2.031 trillion. The challenge will be for all of us to handle the increased business efficiently and profitably. Now is the time to make your move by investing in the systems and people that will help you meet the increased demand. Consumers will demand value, friendly packaging and quality goods.

The positive forecast for consumer goods is grounded in reality. Disposable personal income is holding steady, and gasoline prices are heading lower for now; both bode well for more consumer spending. Private hourly wages are a record-high $23.41, and the improvement in employment means there will be more people with money prowling the malls and the internet looking for goods to buy.

ITR Economics uses many key leading indicators in our proprietary forecasting process. The ITR Leading Indicator is an exceptionally reliable indicator of future economic activity. It leads the U.S. economy and consumer-nondurable-goods new orders through business-cycle highs and lows by a median of 11 months.

The benefit of seeing a year into the future is compounded exponentially by the fact that our leading indicator has not given a false signal in regard to the overall economy for more than 30 years of testing. The ITR Leading Indicator is currently signaling more rise in the U.S. economy and in consumer-nondurable new-orders activity in 2013. The ITR Leading Indicator and other key indicators are provided monthly in the ITR Trends Report.

Expect widespread consumer spending. Readers should anticipate upside activity across a broad swath of consumer goods, including food and beverage, computers, apparel, sporting goods and personal-care products to name a few.

Consumer-nondurable-goods new orders are growing at a 12.1% annual rate. It is important to recognize that our forecast calls for a slower rate of rise in the new-orders dollars trend from now through 2013. It would be a mistake to straight-line your own rate of growth over the last year and project that same dynamic through the four quarters. Moderate your growth rate but be prepared for the increased volume.

A Trendcast and company-specific forecast would need to be done before I could tell you how much to moderate your expectations, but the overall consumer-nondurable-goods new-orders trend is expected to see the year-over-year growth rate in 2012 slow to about 8.6%. A milder low-single-digit rate of growth is projected for 2013. The management challenge is to be ready for the increased demand without over-allocating resources based on the exuberance of the last 12 months.

Contributing Editor Alan Beaulieu is an economist and president of ITR (itreconomics.com). He is co-author, with his brother Brian, of "Make Your Move," a book on spotting business-cycle trends.

See also:

No Time for Uncertainty

Expect Busier Days Ahead for U.S. Businesses

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