Wednesday, October 28, 2009

SAP says companies aren't buying

No, really? This has been the consistent theme that I've been harping on all summer long. The government is the only game in town when it comes to large capital spending right now. SAP isn't a household name for many, but they are global software player that is often a good gauge of economic activity around the world.

"SAP, which today reported a less-than-expected 12 percent increase in third-quarter profit, cut its sales outlook for the second time this year. Software and related service revenue will fall between 6 percent and 8 percent in 2009"

Pushing up profits via cost cutting only lasts so long.

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Oh boy, here come the holiday surveys.

When asked in November how much they will spend on the holidays consumers are always terrible at gauging their spending. We tend to overestimate what we will spend and that has been shown repeatedly as the surveys always are more optimistic than the real spending results.

It one of the more detailed surveys I've seen on the subject, Deloitte Consulting (yeah, Deloitte!!) has some interesting observations from consumers. Again, I think all of these numbers will probably be cut substantially, because consumers tend to be overly bullish about their future in surveys, but we'll see how it plays out.

Even Deloitte is guilty of a little happy pill spin when they title the report "Holiday Cheer Makes a Comeback", but then they note

"The amount consumers plan to spend on gifts is down as well, to $452 compared with $532 in 2008, and $569 in 2007.

Consumers, however, do appear willing to increase their spending on the non-gift items that traditionally account for a smaller portion of the holiday budget. These categories include socializing away from home, entertaining, non-gift clothing and home/holiday furnishings. These increases lift consumers’ total anticipated holiday spend to $1,145, which is a 16 percent increase over last year."

Gift spending is forecast to fall 15% but socializing, entertaining and holiday furnishings are expected to jump 16%. Maybe, but that seems like a stretch. "I'm cutting back on gifts to my kids so I can buy some more junk from the Christmas Tree Shop." I'm not sure I buy that logic.

Here's a great excuse to use my favorite line re: consultants....

Consulting: If you can't be part of the solution, there is good money to be made prolonging the problem!

That's gold, Jerry, gold!

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