Vitago

Right now people are spending thousands of dollars on gifts for other people. They are doing this because they believe it is the right thing to do.

Holiday shopping can make or break a business. The last few years I’ve watched the post-season wrap-up on the news. Who made profit? Who didn’t? Who’s filing for bankruptcy?

I’ve watched American institutions like Montgomery Wards close their doors after a poor holiday performance. My sister worked there while that happened. My brother had worked there years before. It was like losing part of the family.

And that’s when the economy was good.

Now it appears the economy is not so good. The housing market is sliding and everyone agrees that will continue for the next couple of years. Finding good work is tough because it’s an employers market. And there is a sense that we are heading into a recession… if we aren’t already in one.

The news seems to be pushing this idea along which isn’t helping. Negative press creates belief. And people act on what they believe.

For retailers this means a drop in consumer confidence. According to the University of Chicago, consumer confidence is attitudes towards current and expected economic conditions, both personal and national.

When people make spending decisions it looks like this:

Confidence is the perceived ability to cover the expense of the purchase in a reasonable amount of time. If the economy is good, the confidence increases. People spend more money; sure that their jobs are secure or that other economic opportunities will present themselves.

Confidence drops when the economy is bad. Buying habits move to the right. Purchases are put on hold… maybe forever.

Belief moves nations!

The more people believe the economy is good, the more they spend, the better the economy becomes.

Good News for the US Economy

According to the latest White House figures:

• Unemployment is at 4.7% with new job growth for the last 50 consecutive months – the longest period of uninterrupted job growth in history!
• The gross domestic product (GDP) grew 3.9% in the third quarter of 2007. This is more than the previous 6 years of growth that averaged 2.8%.
• The deficit is well bellow the 40-year average at 1.2% of the GDP.

And Comscore reports holiday spending is up 17% over last year.

Questions to Consider

With such strong job growth, how has this remained an employer market? What role does the belief that it is an employers market re-enforce that idea?

Where else does belief affect your finances? The first thing I think of is credit rating or the measured belief of your willingness and ability to pay your credit debt based on past performance.

This entry was posted on Monday, November 26th, 2007 at 2:50 am and is filed under Accounting, Inspection, Wealth. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.