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News of a Weak Economy Promotes Cautious Consumers

March 5, 2008

For many months now the press has been reporting poor economic news and sending messages of a recession approaching. Economists originally reported that this is not the case, however, it seems that the more these reports hit the press, television and radio the more people begin to believe and act accordingly. As noted in today’s associated press column on the economy;
   http://biz.yahoo.com/ap/080305/fed_economy.html

    "WASHINGTON (AP) — The economy has weakened since the start of this year as shoppers turned even more cautious given the severe housing slump and painful credit crunch.
    Many economists fear that the country is teetering on the edge of a recession or is in one already.
    "Economic growth has slowed since the beginning of the year," the Fed reported. Two-thirds of the Fed’s 12 regions "cited softening or weakening in the pace of business activity, while the others referred to subdued, slow or modest growth," the Fed said.
    The report suggested that persisting problems in the housing market and harder-to-get credit are  affecting the behavior of individuals and businesses alike — making them think twice about  spending and investing.
    Spending by consumers accounts for a big chunk of overall economic activity and thus plays a major role in determining whether the economy will survive the housing and credit crises or fall victim to those problems.
    To help shore up things, the Federal Reserve has been cutting a key interest rate since September. As the economic situation continued to falter, the Fed turned much more aggressive. It slashed rates by 1.25 percentage points in the span of just eight days in January — the biggest one-month rate reduction in a quarter century.
    Fed Chairman Ben Bernanke signaled last week that the central bank stands ready to lower rates again at its next meeting, March 18.
    Some worry that the country could be headed for a bout of stagflation — a dangerous mix of stagnant economic activity and stubborn inflation. But Bernanke, in his congressional appearance last week, said he didn’t believe that was the case."

Let’s hope that Bernanke is correct in his beliefs. We must also hope that the press does not continue to paint a dark and dismal picture. Let’s consider what would happen if all of a sudden the press started to agree with Bernanke and reported that the economy is not moving in a downward direction. Think of how this could potentially stimulate consumer spending. Positive news could nudge consumers into a more comfortable feeling, which would then relate to more spending.

The more that I watch and listen to the press the more that I realize they would much prefer to paint a bleak picture, because it makes better headlines which in turn relates to more people tuning in and better business for them. How often do you turn on the news or pick up a newspaper and see all good news being reported? Not often enough in my opinion.

So what are we to do to help stimulate spending in the event that the news media continues on their present course? We need to get in front of the consumers with positive, feel good marketing materials. It is important to make the consumer want to spend on their casual living needs. With spring approaching what better way to feel good than to spend time in our outdoor living spaces. If consumers are going to control spending than at least appeal to their sense of well being with advertisements. Let them feel good about staying at home and enjoying their family and friends in the comfort of their outdoor spaces. And encourage them to spend on the right things like casual living furniture and accessories.

It is worth a try. What are your outside views?

Write a comment and let me know.

Marcia Blake