It’s the time of year for reflecting on the past and planning for the future. But the American wine industry finds itself wondering just exactly what that future holds.
‘A lot of people aren’t willing to use the R-word yet’, says Steve Spadarotto, chairman and CEO of Far Niente Wine Estates in Napa, ‘but in my opinion, we’re in a recession already. Some people say wine is recession-proof but I can tell you, it’s not.’
The American wine industry remains subject to the same swirling economic currents as every other sector of the market, plus some unique headwinds of its own, namely the lingering effects of fires in wine country and dramatic changes in both trade and consumer buying behaviours driven by pandemic lockdowns.
Producers have also still not fully recovered from supply-chain disruptions that dramatically increased their costs for goods such as glass bottles or labels. Now they are facing reduced supplies of grapes thanks to the fires, and the signs that demand may be softening even as they head into a traditionally strong month for wine purchases.
In both America and Europe the commonly accepted definition of a recession involves a decline in GDP for two sequential quarters. That’s precisely what happened to America (and many other countries) in the first half of 2022, but few if any economic commentators were willing to claim that the US was truly in a recession. In part this was because of historically low unemployment numbers. Then the economy grew again in the third quarter by 2.6%, silencing even the most pessimistic pundits who were ready to ring the recession alarm bells.
However, with the Federal Reserve continuing to raise interest rates, the cryptocurrency markets tottering towards collapse, various companies laying off thousands of workers, and consumer confidence at its second-lowest point in the past 24 months, very few people in America seem to be wearing rose-coloured spectacles.
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