CSNews Forecast: Politicians Likely to Avoid Fiscal Cliff
BASKING RIDGE, N.J. – With President Barack Obama and House Speaker John Boehner now conducting private face-to-face meetings, U.S. political leaders will likely work out some kind of compromise on taxes and spending issues to avoid the so-called "fiscal cliff" – a series of automatic, deep spending cuts and tax increases on all Americans that would go into effect in January if no agreement is reached.
That's the opinion of Maureen Maguire, president of economic consulting firm ThinkResearch, who said lawmakers would be blamed for plunging the country into another depression if they cannot agree on a compromise.
Maguire, speaking at the Convenience Store News 2012 Industry Forecast Council, noted that if nothing is done in Washington, scheduled tax increases and spending cuts equal to 4.25 percent of gross domestic product (GDP) will go into effect.
"If we fall off the cliff, economists agree that there will be a recession in the first half of 2013 and that overall GDP growth will be approximately 1.1 percent for the year," said Maguire, who forecast 1.6 percent growth for 2012.
"If we kick the can down the road by postponing a decision, we'll have the same problem in April when the debt ceiling needs to be addressed again," she added.
A full resolution, which moves toward deficit reduction and reins in entitlement spending, would be the best solution, according to Maguire, and would result in marginal economic improvement over 2012. "2013 will feel like a breath of fresh air," she said, forecasting economic growth of 2.3 percent for such a scenario.
Several convenience store retailers at the Forecast Council meeting, however, didn't share Maguire's faith in government leaders. "Businesses don't trust the ability of politicians to make things work," said one attendee. "So, businesses will continue to hoard their cash because they don't believe the government's leaders know how to manage the economy."
This year's CSNews Industry Forecast Council, sponsored Logic Technologies, McLane Co. and S&D Coffee Inc., included representatives from The Pantry Inc., Hess Corp., RaceTrac Petroleum, Royal Buying Group and Quick Chek Corp..
Maguire, who serves as CSNews' analyst for its annual Industry Forecast Study, also presented these conclusions about the prospects for the U.S. economy in 2013:
• Inflation will remain low, despite the Federal Reserve's "accommodative" money policies. She predicts the Consumer Price Index will rise just 1.5 percent in 2013, a decline from the 2-percent increase in 2012.
• Retail sales, excluding autos, will rise by 6.5 percent, a solid gain over the 4.6-percent increase projected for 2012.
• The unemployment rate will remain stubbornly high at 7.8 percent next year.
Aside from offering the macro-economic view, Maguire also provided an advanced look at the CSNews 2013 Industry Forecast Study, which predicts unit and dollar sales for several key convenience store product categories. Among the bright spots, predicted by the economic forecasting model developed exclusively for CSNews, are energy drinks, other tobacco products, candy, salty and alternative snacks, and the still-exploding electronic cigarettes segment.
An executive summary of the Forecast Study results, which also includes forecasts for motor fuel, cigarettes, alcoholic and packaged beverages, will appear in the January issue of Convenience Store News and the February issue of Convenience Store News for the Single Store Owner.
This year's Forecast Council also included a special presentation on "The Year Ahead for Consumers and C-Stores" by James Russo, vice president, Global Consumer Insights, at Nielsen. Russo noted that consumer confidence continues to be challenged by economic factors, such as the volatile housing, equity and labor markets, fuel costs and inflation.
A big problem for retailers, said Russo, is that median incomes continue to decline, leaving consumers with fewer disposable dollars to spend. On the positive side, fresh food is driving more and more shopper trips for consumers, who are acting on this trend.
Among the keys to growth, Russo explained that retailers need to understand that consumers in America are being polarized by income level. "One in two Americans own stock, but one in seven are also on food stamps," he said. "One size doesn't fit all."
He also noted that the multicultural opportunity is immense given the growing Hispanic-American, African-American and Asian-American populations.