The success of any marketing plan depends largely on how well it accounts for the business and economic conditions that exist when the plan is executed. Therefore, as marketing leaders develop their plans for 2022, it's vital that they assess what the economic environment is likely to be next year.
This assessment should include an analysis of several macroeconomic indicators and industry-level data. At the macro level, most marketing leaders need to assess expected levels of economic growth, unemployment, consumer spending, business investment and inflation. At the industry level, they should focus on the economic factors that will or may impact demand for their company's products or services.
Several organizations have recently released economic forecasts that cover all or part of 2022, and I'll describe some of these predictions in this post. All of the forecasts discussed here are regularly updated, so marketers should check them often to ensure they are working with the latest economic outlooks.
Real GDP Growth
Most economists and other forecasters now expect the overall U.S. economy to experience above-average growth in 2022. In September, U.S. Federal Reserve Board members and Federal Reserve Bank presidents predicted that U.S. real GDP will increase by 3.8% next year (mean of individual forecasts). In October, The Conference Board also estimated that real GDP will grow 3.8% in 2022.
Several Wall Street economists tracked by CNBC and Moody's Analytics are predicting GDP growth of 3.9% in 2022 (average of individual forecasts).
To put these forecasts in perspective, many economists believe that the maximum sustainable growth rate of the U.S. economy (measured by real GDP) is 2% - 3%.
Unemployment
The U.S. unemployment rate has fallen dramatically since the pandemic high of 14.7% in April 2020. Last month, it stood at 4.6%, according to the U.S. Bureau of Labor Statistics.
Most economists expect the unemployment rate to continue declining in 2022. For example, the Federal Reserve is now estimating that the average unemployment rate in the fourth quarter of 2022 will be 3.8%. The Conference Board is forecasting that the unemployment rate will fall from 4.8% in the fourth quarter of this year to 4.1% in the second quarter of next year.
Consumer Spending
Consumer sentiment declined sharply in August of this year and remained low in September and October, according to the University of Michigan's Index of Consumer Sentiment. Many economists have attributed this decline in consumer confidence to the summer-early fall surge of COVID-19 cases fueled by the Delta variant. In the October report, the University of Michigan researchers noted that the continuing low level of consumer optimism was primarily due to growing concerns about inflation.
Despite these downbeat readings on consumer confidence, most forecasters expect consumer spending to be strong next year. For example, The Conference Board expects real consumer spending to increase at annualized rates of 4.2% in the first quarter and 3.5% in the second quarter of 2022. And Deloitte predicts that real consumer spending will increase by 3.5% over all of 2022.
Business Investment
Historically, business investment levels have been closely correlated with CEO confidence about future economic and business conditions. This relationship bodes well for business investment in 2022. In the latest McKinsey Global Survey of business executives, 51% of North American respondents said they expect economic conditions in their home country to improve over the next six months.
The Conference Board is estimating that "nonresidential investment" will increase at annual rates of 5.0% in the first quarter and 5.2% in the second quarter of next year. For all of 2022, Deloitte is forecasting that "real fixed business investment" will grow 3.2%.
Inflation
Taken together, these forecasts suggest that the overall U.S. economy will continue to be in full-blown recovery mode in 2022. If these forecasts are accurate, most B2B companies should be operating next year under business conditions that are generally favorable.
But there is one storm cloud on the horizon that has recently become more concerning . . . inflation.
In the twenty-first century, inflation has largely been a non-issue for most U.S. businesses and consumers. From 2000 through 2020, the average annual change in the U.S. Consumer Price Index (CPI) - the rate of inflation - was 2.48%.
In contrast, the CPI increase over the twelve month period from October 2020 through September 2021 was 5.4% (all items, not seasonally adjusted), according to the U.S. Bureau of Labor Statistics. The Federal Reserve has taken the position that this recent inflation will be "transitory," but many economists are now contending that higher inflation will be more persistent than the Federal Reserve expects.
The inflation occurring now is being driven primarily by supply chain disruptions that are affecting a significant (and growing) number of products. These supply disruptions are creating shortages and driving up prices at the producer level. For the twelve month period from October 2020 through September 2021, the U.S. Producer Price Index (final demand, not seasonally adjusted) increased 8.6%, according to the U.S. Bureau of Labor Statistics.
The Federal Reserve maintains (and many economists agree) that inflation will recede toward more "normal" levels in 2022. At present, the major uncertainty is how soon the decline will begin and how far the inflation rate will fall. If inflation remains elevated for a significant part of 2022, the other economic indicators discussed in this post could turn out to be less positive than the latest forecasts suggest.
Image courtesy of Fertile Ground via Flickr (CC).
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