David Nelson gives the economic outlook for 2015.
By Erin Rigik, Senior Editor
Steve Loehr, vice president operations support, Kwik Trip and NACS Chairman kicked off the 2015 National Association of Convenience Stores (NACS) State of the Industry (SOI) event at the Lowes Chicago O’Hare Hotel in Chicago on Wednesday, April 15.
This year, some 476 attendees registered for the summit. “Our attendance is the largest in the history of the SOI Summit and 15% larger than last year,” Loehr said. “This shows a positive story about SOI. Despite challenges in the economy and retail environment, we are an industry that is growing. NACS brings together retailers to learn and share ideas and make all of us better.”
Chairman of the research committee at NACS, Joe Sheetz, president and CEO of Sheetz Inc. and NACS vice chairman, reminded guests that data gives us the confidence to take on new ideas. “One of the reasons I got involved in research is because of the emphasis we put on data at Sheetz. We’re data junkies. We crave data and use it to make every decision. It allows us to benchmark against other companies. It allows us to operate 500 stores while maintaining that small business culture.”
The Economy and Opportunities for Convenience Stores
David Nelson, president, Study Group 900 and professor of Economics at Western Washington University, gave an overview of the economy and the outlook ahead.
“We’ve fully recovered the number of jobs lost in the 2007-09 recession, but it took 6.5 years to get there,” Nelson said.
Employment growth has averaged 269,000 new jobs per month on average over the past 12 months, marking the best numbers since the mid-1990s. We’ve gone 61 months with positive job creation every month. Our unemployment rate is 5.5%, which is considered a fully-employed economy. The forecast for this year is 5.3% and 4.7% the following year. What’s more, the number of people working part time for economic reasons its down from 7 million to 4 million.
Job openings are now rising faster than hires or quits. “Some 5.1 million jobs were open in the most recent period of time and you have to go back 15 years to find that many jobs open,” Nelson said.
Monthly turnover for U.S. retail jobs has increased from 2% to 3% since 2009. Wage growth has been slow rising only 2.1% year over year.
Greater pressure to raise wages is being felt and some retailers and cities and states are leading the charge by doing so.
“What’s your plan to deal with a tighter labor market with the unemployment rate getting lower, quit rates increasing and wage pressure building among lower paid hourly workers?” He asked the audience.
Oil is now around $52 a barrel, having come down 50-60% in the last year. “We are the largest petroleum producer in the world today,” Nelson said. “Non OPEC output has surged and U.S. imports of petroleum products are at a 28-year low.”
When it comes to crude oil prices, there is a price war going on right now. Real oil prices are about average compared to the last 50 years. For consumers, it means a $750 tax cut for every American household.
But while production soars, demand has not. Fuel consumers per person is down -17% over the last 10 years, fuel consumed per vehicle is down -14%, and miles driven per person is down -8%.
U.S. oil consumption is now projected to rise by 380k by 2019.
The Dollar and the Economy
Imports are rising but exports are not rising. One factor is that the U.S. economy grew 2.4% last year, while, meanwhile, Eurozone was up only 0.9% last year and so consumers aren’t buying as much compared to the U.S.
“The U.S. dollar has gone up 20% over the last year. But everything else is weaker. It makes our goods uncompetitive. New orders for U.S. export goods are declining,” Nelson said.
Consumer spending here at home is up. Disposable income in Jan 2014 was up 3.6% and by Jan 2015 it was up 4.4%. Top consumer spending categories include food and beverages, financial services and foodservices, all areas c-stores can provide.
A lower national unemployment rate and growth of employment means more commuters driving by your stores looking for food and fuel, but also more labor turnover and less applicants per position open and upward pressure on wages particularly at the lower tiers.
Lower oil prices means low inflation in 2015, increased demand for larger new passenger vehicles and trucks, a slowdown in transition to alternative fuels, greater consumer purchasing power and higher economic growth.
A strong dollar means low inflation in 2015 as prices of imported goods fall, greater consumer purchasing power, pressure from foreign competition, and a reduction in the pace of economic growth.
Nelson predicted the U.S. economy should continue to grow with solid gains in real consumer spending.