Consumers Remain Cautious, Anxious and Nervous

Last week: Economist surveys all show recent upward revisions to their forecasts. Average consumers are also turning a little more positive about near-term prospects. They sense that while the economy has a long way to go, it’s unlikely to detour back into a downturn. Still, consumers have two very big questions (how much? how soon?) and remain cautious, anxious and nervous about potential answers.

THE SITUATION ABROAD

Global trade rose by 2.3 percent in November, more than twice the pace of this past summer. This is also a little more than twice the rate of increase in global industrial production. Trade and production in the Asia/Pacific region outpaced the rest of world, a trend very likely to continue through 2011. One by-product of this rapid pace however, is the continued surge in commodity prices, especially for energy and for food. Still, a poll taken for the World Economic Forum in Davos suggests half of the bosses of the world are optimistic. That's a better percentage than when these titans of industry gathered last winter.

FACT OF THE WEEK

10 percent. The U.S. economy has been out of recession for more than a year and a half. And The Conference Board Leading Economic Index® for the U.S. is pointing to developing momentum over the very near term. The timing could not be better for most of the cities and states. Their overall revenue (from property, income, and sales taxes as well as fees) remains about 10 percent below pre-recession levels. What’s more, the long and severe economic downturn increased the demand for public (and therefore publicly funded services). As big a long-term structural problem the deficit at the federal level represents, the magnitude of the problem at the state and local level is even more critical. In fact, there is a chance that growth prospects could be negatively impacted in 2011.

QUESTION OF THE WEEK

Will smart phones make credit cards obsolete?

The smart phone has eclipsed the smart card. IPhones, Droids, Blackberries and other devices can surf the web, take and send pictures, and make and receive calls. They are being used to make “contact-less” transactions as well. Users make various purchases (including quickly getting through the line at the concession stand during the intermission of games). Already, this market has grown from nothing to as much as $15 billion and could grow to several hundred billion before mid-decade. The limitations are in terms of the number of phone users and the outlets capable of handling “contact-less” transactions. Yet, that much growth in such a short period of time is doubtlessly going to increase the number of users and vendors of this so-called mobile wallet.

These devices allow one to make a purchase, check one’s balance, and look up past purchases, among other functions. In addition, one could surf the web, text a friend, even write a note for future retrieval, all while waiting on line to make a purchase. And Apple is now launching an app (application) that allows users to access their own bank accounts. So add banking to the list of options. Oh, did I mention, it can also be used to make a call?