A major concern facing the U.S. economy is inflation, which is a by-product of higher energy costs, industry and economic analysts say. According to the U.S. Department of Commerce?s Bureau of Economic Analysis, inflation, as measured by prices for domestic purchases, increased 4.0 percent in the third quarter of 2005 after increasing 3.3 percent in the second. Those signals are a sign of what?s to come, suggests Jim Meil, chief economist of Eaton Corp. and a point person on the National Association for Business Economics? (NABE) October Industry Survey. Although responses to the survey suggest an economy that is resilient, with businesses reporting higher customer demand, better margins and solid capital spending, ?our survey respondents are telling us they have been?and will be?raising prices more aggressively than in the past,? Meil says.
The survey polled 101 NABE members, professionals with an interest in business economics who want to use the latest economic data and trends to enhance their ability to make sound business decisions.
With declining disposable incomes (BEA reports real disposable income declined 0.9 percent in Q3 2005) and expectations of a brutal spike in heating costs, consumers were understandably jittery at the beginning of the fourth quarter of 2005. ?U.S. consumers will be tasered when they get their heating bills,? says Cristina Lee, a former business journalist who now consults on investment strategies.
The Conference Board, an economic research organization whose reports often influence the decision making of top business executives, said its Consumer Confidence Index, which had plummeted in September, declined again in October. Its Present Situation Index and Expectations Index also decreased in the same period, the group said. Similarly, the early November Experian-Gallup Personal Credit Index showed that about one-third of consumers will spend less this holiday season and a small portion will even resist putting up Christmas lights to save money.
However, a separate study conducted for the National Retail Federation shows a 5 percent increase in spending this season, as consumers who plan to increase their outlays more than offset those cutting back. Lee is not surprised. ?U.S. consumers have learned to consume and live a good life. What?s a dollar more for fine French cheese, or 10 bucks more for fine wine?? she says, adding, ?I see manufacturers revving up their machines for more consumer demand for their products.?
Most analysts agree that the economy absorbed the immediate shocks and costs of hurricanes Katrina, Rita and Wilma fairly well. Predictions are that gross domestic product, the nation?s output of goods and services, will increase at a 3.5 percent annual rate in the first half of 2006, instead of the 3.2 percent initially forecast, as post-hurricane rebuilding boosts nonresidential spending and investment. Some say the rate could reach 3.7 percent by the end of 2006.
Analysts note, however, that rising energy costs combined with the longer term impact of the hurricanes and higher interest rates expected from the Federal Reserve could dampen the appetite of U.S. consumers, which has been the driving force of the economy.
Breakthroughs in medicine and health helped push the average life expectancy for Americans to 77.6 years, a record high, according to the Centers for Disease Control and Prevention. In their book, The Power Years: A User?s Guide to the Rest of Your Life (John Wiley & Sons, 2005), authors Ken Dychtwald, president and CEO of Age Wave (www.agewave.com), and Daniel J. Kadlec, a journalist and former senior writer at Time magazine, say demands from the longer-living population will boost the following industries:
? Specialty diagnosis and treatment centers for particular body parts, such as the eyes, ears, muscles, bones or nervous system.
? Therapeutically cloned kidneys, livers, lungs, hearts, skin, blood and bones, which will be used to tune-up or replace diseased or aging organs.
? Nutraceuticals engineered with macro- and micronutrients to fight aging.
? Cosmeceutical rejuvenation therapies for both men and women.
? Smart acoustical systems in telephones, radios and TVs that customize signals to accommodate the auditory range of each user?s ears.
? ?Retirement zone? stores featuring products and technologies appealing to older adults with free time.
? Mature dating services to help the tens of millions of single mature women and men find new relationships.
? Adventure travel services that send older adults to off-the-beaten-trail locations.
? Intergenerational communes.
? Multinational time-share clubs for those who aren?t interested in settling down in one location.
? Longevity insurance that rather than paying an individual?s family in case of early death, provides financial support for people who live for a long time.