We've been giving a lot of thought lately to the rising risk of recession and what it might mean for pro AV next year. More specifically, whether a recession challenges any of the fundamental reasons for growth we've held up so far in support. Most important among these being the return to in-person activities. Clearly this return is happening as evidenced by concert attendances and travel demand. But questions remain. Such as, have we seen the peak of this, particularly as audiences and travelers respond to disposable income pressures, thereby pushing related businesses to decrease spending on experiential AV solutions? Similarly could rising financing costs cause enterprises to pullback on investments in core supportive technology like conferencing and collaboration?
Here's our current thinking -- the answer to both are a 'NO', for 3 primary reasons:
1) Consumers are likely to keep focused out-of-home.
Consumers were avoiding all manner of activities during the pandemic, with 2 years lost to some degree, so it's reasonable to assume a similar time frame to release this demand. Year one for that is arguably this year. Thus, even if their disposable income to come under some pressure from rising costs, they would appear likely to maintain emphasis on out-of-home activity and pull back instead on investments for the home. This keeps revenue in the parts of the economy in which pro AV plays a large role.
2) Supply constraints extend out demand.
Businesses, who were both adjusting to hybrid and responding to a return of their customer, needed more technology and started to demand it but then faced supply chain issues. These issues extended out the period of fulfillment of the demand, muting the current growth rates in the process. Thus, while a recession may impact future demand, we still haven't caught up to all the existing! This potentially off-sets declines in new demand and allows the industry time to catch up. It's the flaw as feature argument.
3) Technology, including AV, has outsized importance.
Beyond supporting in-person experience, AV technology has also proven to be a crucial ingredient to supporting business activity generally speaking. Conferencing and collaboration solutions are perhaps most notable here as they become both more important and changed to suit shifting work behaviors. Some of this may have played out through adaptive spending over the past couple of years but more likely remains as companies continue to adapt and improve upon their implementations. Rising wages may also compete here to some degree as companies balance their investments between people and technology resources but so far the data support continuing growth in tech spending.
On net, the above clearly reflects a fairly positive outlook on the coming year with its share of assumptions underneath. It's those assumptions we will continue to test and challenge as we go forward from here so stay tuned for updates as we sift through data as it continues to come in. Or feel free to reach out if you would like to discuss or challenge! We welcome a good discussion as we are sure to learn in the process.