Auto Industry
Some really basic research has me thinking that the US consumer is changed forever because of the perfect storm of rising energy cost plus a tanking global economy. Consumers have decreased spending on the fears of unemployment and recession. A short term loss of consumer confidence is neither unusual or stupid. The stock market needs to re-set after too long of unqualified over investment and therefore over spending on companies that are not actually making a good profit. Speculation is for those searching for gold, not those looking to make money.
I think that this perfect storm though is going to change how consumers chose to spend their money. Not just in terms of real estate and housing but also what credit is acceptable. Most people are taking a good hard look at themselves right now to try to figure out their financial future. This is making them cut back on frivolous items they previous purchased on a regular basis. Add this to the current "going green" and "buy local" and all of a sudden people aren't spending where they used to.
I live in a very usual place compared to the rest of America. It is a large densely pack city, filled with an interesting mix of people most of who are highly educated when compared to the average American. I walk to work everyday. I don't even fill up my gas tank once a month. I use re-usable grocery bags every time I go to the store - I even use them when going shopping for things other than groceries. I even grow food in pots on my back porch during the summer. I am a pretty average Cambridge, MA resident.
I moved to Cambridge in Janurary from Rochester NY. Between March and August there was a visibly distinct change in consumer actions here. There was a significant increase in non-automotive consumer traffic. When you look at the roads most of the vehicles are commercial vehicles making deliveries or completing tasks (street sweeping) etc. There is still a fair share of consumer traffic but I think that in general the levels have decreased. In the last few months I've noticed a significant decrease in local gas prices, yet no one has decided to drive more. With the global economy tanking and people worrying about if they are going to get layed off or not - they are not willing to go back to their pervious ways. This is also playing out on the US market as a whole, and to OPECs distain - a drop in price has not driven up sales. So now they are trying a drop in production to keep gas prices high. I just hope consumers continue their current trend and keep trying to reduce their fuel consumption.
I think that these changes are here to stay. People have taken a good hard look at where they are spending their money - both due to the increase in fuel prices - but also due to their fears of the global markets and have decided to dial back their spending.
Now forcasters are also starting to look at the markets affected by the increase in fuel costs and the drop in consumer demand due to lifestyle changes that consumers have adopted due to the global market. They are focasting that US consumers are going to move back to their driving additudes and styles of the 50's by decreasing the number of vehicles per household. Currently there are 2.2 Vehicles per household. That's a lot of cars and trucks. Do people really need a car of their own? Apparently not, as the consumer demand for gasoline has been declining. Less miles driven means less cars required.
With the tightening up of the credit market - it has been harder for consumers to gain credit for a car loan. This points to a further drop in total vehicles per household. This is playing out in the auto industry for a while now. Chrysler's financial woes continue as they recently announced that they are going to cut 25% of salaried positions. Which will further decrease the demand for their cars. How? Well most car manufacturers offer employee discounts on their vehicles and encourage them to by a vehicle from the company they work for, show pride in their work. If you cut out 25% of your salaried staff - that is a huge decrease in your most likely consumer.
How will this affect the culture? That will be an interesting one. The introduction of the automobile changed interpersonal relationships in the US forever. By introducing automobiles couples could court outside of their homes and the prying eyes of their families. No longer were sitting in the parlor discussing the latest church happens the equilalent of a hot date - now teenagers and young adults were along with each other for long periods of time.
With the onslaught of the prosperity in the 90's we saw started to think that it was normal that all teenagers get their own car once they turn 16. Teens younger and younger were allowed to start "dating." And we really started to see really early teen pregnancies appear - and start to seem normal. It used to be a shocker when someone found out an 18 year old in high school was preggers. Now it's not even that shocking when we find out a 12 year old girl is preggers. Do I think that this type of sexual revolution is over? Hells no. I just think that it's going to change.
I think it is going to push the average marriage age up faster and I think that people will start having less extravagent weddings. Both of these clearly come down to money. In terms of child rearing I think that we will see an increase of having one parent stay home as the cost of being employed increases along with the costs for day care increase without the average salary increasing. It will make more economic sense for one parent to stay home. I think this will cause further strain on marriages - and we will see the divorce rate go up. I think we will also see the number of children per family continue to decrease as people find it economically impractical to have babies.
With the job losses that we will suffer we will see illegal immigrants return to mexico. This will put further strain on our economy and increase prices further as the cost of labor increases. It will also cause a decrease in population because illegals having children here - those children are legal US citizens. If they do not have children here - there is no reason to stay. Poor people often have more children than their rich counterparts. With the extreme financial stress of the lower class - I think that their average children per family will decrease. I think that in 10-20 years the US will have to start inticing women to have more children in order to keep up their population - similar to how countries in Europe are doing it now.
It should be an intersting ride for everyone out there.
I'm just afraid that it's going to take another war to pull us out of this mess.
I think that this perfect storm though is going to change how consumers chose to spend their money. Not just in terms of real estate and housing but also what credit is acceptable. Most people are taking a good hard look at themselves right now to try to figure out their financial future. This is making them cut back on frivolous items they previous purchased on a regular basis. Add this to the current "going green" and "buy local" and all of a sudden people aren't spending where they used to.
I live in a very usual place compared to the rest of America. It is a large densely pack city, filled with an interesting mix of people most of who are highly educated when compared to the average American. I walk to work everyday. I don't even fill up my gas tank once a month. I use re-usable grocery bags every time I go to the store - I even use them when going shopping for things other than groceries. I even grow food in pots on my back porch during the summer. I am a pretty average Cambridge, MA resident.
I moved to Cambridge in Janurary from Rochester NY. Between March and August there was a visibly distinct change in consumer actions here. There was a significant increase in non-automotive consumer traffic. When you look at the roads most of the vehicles are commercial vehicles making deliveries or completing tasks (street sweeping) etc. There is still a fair share of consumer traffic but I think that in general the levels have decreased. In the last few months I've noticed a significant decrease in local gas prices, yet no one has decided to drive more. With the global economy tanking and people worrying about if they are going to get layed off or not - they are not willing to go back to their pervious ways. This is also playing out on the US market as a whole, and to OPECs distain - a drop in price has not driven up sales. So now they are trying a drop in production to keep gas prices high. I just hope consumers continue their current trend and keep trying to reduce their fuel consumption.
I think that these changes are here to stay. People have taken a good hard look at where they are spending their money - both due to the increase in fuel prices - but also due to their fears of the global markets and have decided to dial back their spending.
Now forcasters are also starting to look at the markets affected by the increase in fuel costs and the drop in consumer demand due to lifestyle changes that consumers have adopted due to the global market. They are focasting that US consumers are going to move back to their driving additudes and styles of the 50's by decreasing the number of vehicles per household. Currently there are 2.2 Vehicles per household. That's a lot of cars and trucks. Do people really need a car of their own? Apparently not, as the consumer demand for gasoline has been declining. Less miles driven means less cars required.
With the tightening up of the credit market - it has been harder for consumers to gain credit for a car loan. This points to a further drop in total vehicles per household. This is playing out in the auto industry for a while now. Chrysler's financial woes continue as they recently announced that they are going to cut 25% of salaried positions. Which will further decrease the demand for their cars. How? Well most car manufacturers offer employee discounts on their vehicles and encourage them to by a vehicle from the company they work for, show pride in their work. If you cut out 25% of your salaried staff - that is a huge decrease in your most likely consumer.
How will this affect the culture? That will be an interesting one. The introduction of the automobile changed interpersonal relationships in the US forever. By introducing automobiles couples could court outside of their homes and the prying eyes of their families. No longer were sitting in the parlor discussing the latest church happens the equilalent of a hot date - now teenagers and young adults were along with each other for long periods of time.
With the onslaught of the prosperity in the 90's we saw started to think that it was normal that all teenagers get their own car once they turn 16. Teens younger and younger were allowed to start "dating." And we really started to see really early teen pregnancies appear - and start to seem normal. It used to be a shocker when someone found out an 18 year old in high school was preggers. Now it's not even that shocking when we find out a 12 year old girl is preggers. Do I think that this type of sexual revolution is over? Hells no. I just think that it's going to change.
I think it is going to push the average marriage age up faster and I think that people will start having less extravagent weddings. Both of these clearly come down to money. In terms of child rearing I think that we will see an increase of having one parent stay home as the cost of being employed increases along with the costs for day care increase without the average salary increasing. It will make more economic sense for one parent to stay home. I think this will cause further strain on marriages - and we will see the divorce rate go up. I think we will also see the number of children per family continue to decrease as people find it economically impractical to have babies.
With the job losses that we will suffer we will see illegal immigrants return to mexico. This will put further strain on our economy and increase prices further as the cost of labor increases. It will also cause a decrease in population because illegals having children here - those children are legal US citizens. If they do not have children here - there is no reason to stay. Poor people often have more children than their rich counterparts. With the extreme financial stress of the lower class - I think that their average children per family will decrease. I think that in 10-20 years the US will have to start inticing women to have more children in order to keep up their population - similar to how countries in Europe are doing it now.
It should be an intersting ride for everyone out there.
I'm just afraid that it's going to take another war to pull us out of this mess.
Comments