Have Confidence in Consumers and a Great Recovery

May 7, 2010
After all, we are getting better economic report cards. I know some fathers who are never happy with their child’s report card. Consider this lecture from a Dad to his fourth-grade son, Johnny: "Well, Johnny, you went up in five subjects and down in ...

After all, we are getting better economic report cards. I know some fathers who are never happy with their child’s report card.

Consider this lecture from a Dad to his fourth-grade son, Johnny: "Well, Johnny, you went up in five subjects and down in none, but you still have one A-, one B+ and two Bs on this report card, and I really do not see you putting all your effort into being a straight-A student."

Wow! What a total clown. This would be a great opportunity for praise, recognition and yes, even some celebration, but instead, it boils down to a critical review and a disappointed Johnny. How stupid is this?

It is the same with our economy and its report card. What I am hearing these days is a lot of complaining, moaning and groaning about the economy. I hear about Greece, unemployment, the Yuan, early Easter, good weather, Washington’s attack on Wall Street, slam dunk comparisons on year-over-year comparison because last year was so bad, etc. It might as well be Johnny’s Dad talking.

Let’s look closer at the most recent economic report card: capital spending is up; retail spending is up; first quarter earnings are up; the Leading Economic Index is up; the Index of Leading Indicators is up; factory output is up, and CEO optimism is up. Economists and companies alike have underestimated the economic turnaround (click here to see the New York Times article, "Consumers Help Drive U.S. Economy to 3.2% Growth Rate," for more on this subject), as well as the impact that consumers can and have had on recovery.

Then why all the pessimism? In my opinion, there are really only three issues that need to be grasped:

1. The US consumer is spending, and this is a good thing. I have said for well over a year now that the US consumer was the key to putting the recession behind us and returning to growth. This is happening.

2. Unemployment is not good, but as we all know, this is a lagging indicator. The unemployment numbers are only important if you are looking backwards, not forwards. By the time unemployment returns to acceptable levels, the recession will be long gone, and growth will be fully embraced.

3. The confidence of company leadership in the recovery is the key issue that will impact whether we have an OK recovery or a great recovery. There is no doubt that we will have a good recovery; it is happening now. But the confidence of leadership in the recovery is what is holding us back from a great recovery. Let me give two examples:

A. Electronic parts shortages: Due to the lack of Comeback Planning by electronics component manufacturers, there exists today a significant shortage in key components. This is having a major impact on the consumer products and fast moving consumer goods high-tech and automotive industries, as well as retailers of these products. Electronics component shortages are resulting in unfulfilled demand, thus slowing the recovery.

B. Retailers with empty shelves: Due to the lack of Comeback Planning by many retailers, they are not replenishing their inventory in the retail supply chain, and their levels of lost sales are high. Customers are leaving stores empty handed. These lost sales are resulting in customers buying less, thus slowing the recovery.

Back to my point: Leadership needs to take hold of their return to robust growth and have confidence that the recovery will be great to ensure that we move from a good recovery to a great recovery. I know, Greece, unemployment, the Yuan… Yet we need to get past this and realize that not taking market share now will result in companies missing out on the Great Comeback.

I see a robust recovery coming, and so my recovery will be robust. Where is your firm? Do you want to be like Johnny’s hapless dad and complain about the recession, or do you want to celebrate a great recovery? I think it’s time to move forward with confidence.

More Resources

Executive Briefing on the Great Comeback
Sourcing and Selling in Challenging Economic Times: How Retailers Should Re-Think Their Operations and Methods

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