There’s been some healthy optimism lately. Google Says Internet Advertising Picked Up Steam in Third Quarter. Intel Profit, Revenue Top Expectations; Shares Leap. IBM earnings grow 14% in third quarter; outlook raised. All well and good, and it is clearly not bad, but this is only half of a picture, and very likely the less important half for a meaningful economic outlook. The one to watch for, the much more substantial indicator, will be Apple, in the week ahead.
That Google is selling more advertising is great news, especially in the advertising slump of the past year, and it tells us that businesses are now at least trying to sell their wares. For a while it almost seemed like there was a punch-drunk defeatism going about, so it’s nice to see that mental fog beginning to lift. That Intel is selling more chips is also a good indicator of consumer product vendors building up their inventories, which, like increased advertising budgets, is a positive signal of optimism. IBM, similarly, sells its products and services primarily to the enterprise, and for lack of a better term, at “wholesale.” Thus, again, it is encouraging to see IBM’s customer base, the “retailers”, gearing up for the “season” ahead.
But all these examples are meaningful in one sense only: there is the presupposition that Google, Intel, IBM, are an intermediate step to the ultimate end-goal, which is a rebounding consumer market. I would define “consumers” not strictly speaking as the shopping mall crowd, although that is a huge part of the GDP equation, but also the small businesses which, together with individual consumers, are the front line of economic activity and by all expert accounts the single most important driver of our national economy. Consumers were over-extended, and the economy went into free-fall. For the economy to rebound, consumers have to come back to the store. All the Google advertising and Intel chips and IBM mainframes sold will fall with a thud if consumers don’t do their share and pick up the retail pieces into which these bundled packages are ultimately reconfigured.
Which is why I say, watch Apple, the ultimate consumer focused enterprise. And even then, watch Apple with a discerning eye. Some of the obvious signals that will be scrutinized by analysts will be the company’s near- and longer-term sales outlook, but there will be a more subtle indicator to look for: the company’s new-product profile, and how this specifically relates to pricing strategy. For a long time Apple has defined a niche for itself as a premium product, premium price, consumer platform. The extent to which Steve Jobs starts to deviate from that very rigid path could give us a good clue about how confident in consumer spending Jobs – a real visionary when it comes to consumer behavior – actually is.
