2022 was a year in distress – war, supply chain delays, inflation, economic downturn – are just a few of the oft-repeated phrases in last year’s vernacular. In the 2022 Gulf South Index report by The Ehrhardt Group and Causeway Solutions, 39% of Gulf South residents and 34% of U.S. residents said they were worse off financially, both higher than 2021. So, what do those rising numbers mean for us going forward into this new year?
Although many may want to hold out hope that we can only go up from here, the economic outlook for 2023 suggests otherwise. Things might have to get worse before they can get better, and no one really knows what’s to come.
Is it bad for us to say, “your guess is as good as ours?”
Global Recession or Not, Things Aren’t the Same
For months now, many analysts have been predicting a global recession. In fact, Bloomberg recently coined this “one of the most anticipated recessions of all time,” and says there is a 65% chance of a recession occurring at some point in 2023. The World Bank forecasts U.S. GDP growth at only 0.5%, while the European Union falls at 0%.
Bloomberg notes just how many of the banks and organizations disagree about the numbers and terms. Bank of America remains confident early 2023 will result in a recession, while others such as Morgan Stanley are not so sure, believing “the economy ‘just skirts’ a recession.” Goldman Sachs goes against the World Bank’s GDP projection, saying the EU will see 0.6% growth.
However, even noting all these disagreements, everyone agrees things are not great.
This is not going to be an easy year, at least at the start. The Federal Reserve raised interest rates multiple times last year; as this is being written, another raise is being considered. The thriving job market, one bright spot of 2022, is now slowing down. The stock market is losing speed as well, and the personal savings of many Americans are down significantly from 2021. Even as people hold jobs and make money, the impacts of inflation make saving difficult, and others are dipping into previous savings at more rapid rates as well, according to the Washington Post.
With so much economic flux and unknowns, it’s important for consumers and businesses alike to make choices that benefit them and remain aware of the consistently changing market.
Sustainable vs. Affordable – The Consumer’s Choice
With a changing financial landscape, the consumer habits of the public are bound to change as well. As we’ve previously mentioned, brand name loyalty is still down in favor of cheaper generic brand pricing.
There are other ways consumers have changed their habits as well. GWI recently reported that trends in sustainability are trending downward in recent years, after previous years of steady growth. Just like brand loyalty, in a time when it feels more necessary than ever to cut financial corners, sustainable products – usually sold at higher price points than generic or regular items – become less of a priority. We must make sure all our own needs are met before we can worry about the needs of our planet.
Speaking of taking care of ourselves, beauty products and related sales are rising – unlike many other industries. This may seem like a random outlier, but it serves as a forecast for economists. Coined during the 2001 recession, the ‘lipstick index’ indicates the phenomenon of heightened beauty and self-care sales during an otherwise declining economy. Economists have seen this trend through years of recessions, and 2023 is no exception. According to a consumer report by GWI, “When money is tight, we generally make space for small indulgences that put us in a good mood.” This is true across different genders and generation as well.
The numbers reflect this. As of November, the Wall Street Journal noted that of the 14 categories tracked by market research firm the NPD Group, prestige beauty is the only one with unit sales growth year after year.
In difficult economic times, we might say goodbye to our everyday trusted brands, but these products feel like a smaller price to pay for a fleeting feeling of luxury.
A Silver Lining
It is no secret that things seem messy. For every article doubting a recession, there is another confirming it. The economy (all aspects of it) seems to be in a constant flux of up and down. All the above predictions change constantly, as do our reactions to them. Uncertainty can be more unsettling than a definitive recession. It’s harder to act when there is no consensus on what to do.
For now, the most important thing is to make sure we’re in the best financial shape we can be, regardless of the circumstances.
Besides, things aren’t all bad. Gasoline prices are still cooling after a pricey summer, and recent reports show inflation may have officially peaked. Both large and small ticket items have seen price drops, some items even going lower than pre-pandemic pricing, according to The Washington Post.
This does not mean we’re out of the woods. And it isn’t a guarantee that we will avoid a recession or other economic issues. It is, however, a silver lining in all the concerns and contradictions about the U.S. economy’s future. There is much uncertainty going forward, and a lot of it might look grim. The best consumers can do is make the best decisions for themselves, and business owners making the best decisions for their businesses.
Back in the Gulf South region, we always like to lean towards a more positive outlook. Even if many residents recognize a downward trend in finances, we are a resiliently sunny group. Between 2021 and 2022, the rate of Gulf South residents who believe the American dream is within reach went up from 50% to 54%. We still believe there are better days ahead, no matter what the numbers may or may not say.
Preparation may look different for everyone – skipping on sustainability, buying less or cheaper, or splurging anyway – but staying in touch with the latest updates, and continuing to look forward, is essential to making the best choices.