Next year is probably going to be a lot like this year–economically speaking. The Conference Board released its economic outlook for 2018 and while generally upbeat, it predicted the world’s gross domestic product would hit about 3 percent for both this year and next, but risks remain.
Brian Schaitkin, the board’s senior economist for the United States, noted that several analyses of the tax plans before Congress “are very much tilted toward corporate tax cuts…There are going to be many taxpayers at all levels of income who would end up paying more in terms of individual income taxes than they would at present.”
Bart van Ark, the chief global economist for the board, cited trade conflicts, labor shortages, China’s growth slowdown, as well as global monetary policy being challenged by low inflation and maturing business cycles. There are, of course, the usual risks associated with political rifts and higher oil prices.
Neither business nor consumers like uncertainty. Tax policy in the United States, Brexit and the refugee crisis, terrorism and natural disasters all contribute to uncertainty.
What Does This Mean For Wine?
“I think there’s probably a fair amount of uncertainty about the overall economic outlook, given the current state of politics,” said economics professor David Jaeger of City University of New York’s Graduate Center. “But that also contributes to uncertainty about the market for wine.
“First, disposable income among the $100K+ crowd could be lower on the coasts if the state and local tax deduction repeal is enacted,” said Jaeger, who is a member of the American Association of Wine Economists. “That would lead to a slowdown in growth or a decline in wine consumption in that group. Second, whenever the economy is uncertain, consumers tend to hold off on consumption.
“Third, and this is more predictable, the aging of the baby boomers and their transition into retirement might lead to a reduction in wine consumption as their incomes decline. Overall, then, I would expect wine sales will not to continue to grow at the pace they have in the recent past or even level off.”
But economists rarely agree on whether a glass is half full or half empty. So, it is only natural that Lynn Franco, director of economic indicators at the board, noted the indicators showed that “consumer confidence increased to its highest level in almost 17 years.
Consumers are considerably more upbeat about the short-term outlook, with the prospect of improving business conditions as the primary driver.” They are also doing more shopping online and refusing to pay full retail price, causing headaches for retailers of all stripes, she said.