Monday, July 27, 2009
Baby Boomers cut spending
An excellent article in BusinessWeek (http://tiny.cc/diOKI) sets out how baby boomers are cutting their spending in this economy. The question becomes "what effect will this lower consumption have on corporate profits". The stock market has rallied recently in part due to optimism about revenue growth at consumer oriented companies like Apple. But the lower consumption may be a long-term trend and some experts believe this would serve to constrain corporate profits and economic growth for years. The BusinessWeek article discusses one such forecast of 2.4% GDP growth over the next thirty years, versus an historical 3.2% annual growth rate since 1965. This is a key consideration all investors will have to measure as they make decisions going forward.