The number of people searching for the term recession in Google globally grew 4.7 times in 5 months, in contrast, in Mexico it has only grown three. At the other extreme, the American Union experienced an increase of 8.33 times. The world awakens to the idea of a new world economic order: high inflation, stock markets in sharp decline and the abandonment —in many countries— of institutional and democratic values. In Mexico, for example, the possibility of a recession is not even admitted, in February 2022 the President ruled out a technical recession in his morning and predicted that Mexico’s GDP would grow 5 percent. Four months later the International Monetary Fund forecasts just 2 percent. A huge distance between fiction and reality.
Most global CEOs expect a recession in 2022
According to the latest survey of Conference Board (a barometer of the health of the US economy from the perspective of US CEOs), the economic downturn is the most worrying issue for the businesses they lead. The index declined for the fourth consecutive quarter in the second quarter of 2022. The measure now stands at 42, down from 57 in the first quarter. The measure has fallen into negative territory and is at levels not seen since the start of the pandemic. The fall indicates that fate has caught up with us and that the actions created to stop the effects of the pandemic were – at best – transitory. 14 percent of CEOs reported that economic conditions were better compared to six months ago, up from 34 percent in the first quarter of 2022. But, 61 percent of them say conditions are worse than a quarter ago .
The data seems to be verified in the North American stock market, in recent weeks it has traded at levels similar to those of June 2020. That month the pandemic became a reality for many consumers and companies. The return to pandemic levels indicates that the days of easy money are over. Authors such as Scott Galloway have insisted that the valuations of companies on the stock market are unreal and that we are experiencing one of the largest bubbles in financial history. For marketing, this presents a problem: where will the brands of the future be? It is known that marketing needs a strong economy to build companies based on brand values. If the consumer is scared, it is difficult to offer new options for products and services. He simply wants to survive.
2022 recession and 2024 denial
The effects of a recession in 2022 are well known in North America and websites have been filled with advice to “invest in the crisis”. The North American is orderly and has begun changes in his consumption patterns to counteract the increase in prices. However Latin America does not seem to be ready, today President Boric of Chile pushed an initiative to increase salaries in an effort to improve the quality of life of Chileans, however many academics point out that these decisions only cause more inflation. In Mexico, the government argued that there would be no inflation problems due to increases in minimum wages; however, the country today has higher inflation than it did three six-year terms. Of course, the inflationary effect is mostly exogenous, but we are facing uncharted territory. It is worth thinking about Ray Dalio author of “The New World Order”. According to Dalio we are facing the end of North American domination. Mexico and many developing countries do not have a defined plan to grow without the economic engine of that country.
We are facing a problem of consumer confidence accompanied by the confidence of the CEO and even of the rulers. The great crisis of 1929 is a reference but does not include the current technological components. Dalio may say that the economic and political cycle is predictable, but he would argue that the recipe is very different this time.
Alternatives and good news
It is not all bad news, the Conference Board survey provides important data for Mexico, 47 percent of CEOs have expanded their supply networks to include the T-Mec region and 7 percent have exclusively used the area. This data should be the other way around, most should choose the T-Mec area exclusively, perhaps the conditions in Mexico or Canada are not attractive enough for it to be so. This should be the main concern of the Government and businessmen, the opportunity exists, we must take advantage of it. Elections are also approaching in Mexico and Brazil, the two largest economies after Canada and the US. Young people are likely to line up for presidents with a more current idea of how to survive the global economic downturn. Finally, companies in times of crisis seek mergers to find economies of scale. We will see a renewed interest in brands that have been forgotten and will have a high value for companies that want to stay relevant. There will certainly be less innovation but there will be more focus on strategies that seek to gain market share.