Does High Inflation Make You Fear for Your Fundraising Efforts?

There’s no doubt. Nonprofit organizations face fundraising challenges that they have not seen for decades. Nevertheless, opportunities remain even as the latest economic news has not been good:

Consumer Sentiment: The University of Michigan Consumer Sentiment Index for March 2022 reveals that consumer confidence has plummeted 25.5 percentage points compared with March 2021. At 59.4 percent, the consumer sentiment index now stands at the lowest point in two decades. This is not surprising given economic conditions. Unfortunately, it means people will now be especially careful with their personal finances.

Uncomfortable Inflation: Treasury Secretary Janet Yellen predicts another year of “very uncomfortably high” inflation. In March 2022, the annualized inflation rate stands at 7.9 percent, a 40-year high. What’s even more troubling is that by calculating the Consumer Price Index now, using the same formula used in 1980, the inflation rate would stand at over 15 percent! The following chart from Shadow Stats illustrates this point:

Consumers Face Increased Expenses: The average American household is facing nearly $300 in higher monthly expenses due to inflation, according to Moody Analytics. Households in rural areas may face even greater monthly costs as fuel prices rise. This will likely negatively affect current philanthropic giving. While individual charitable giving usually comes in around two percent of disposable income, according to Giving USA, we’re now seeing the erosion of household disposable income.

Inflation May Not be Our Only Problem: Inflation is not our only reason for economic concern. Former US Treasury Secretary Lawrence Summers has not just expressed concern about inflation, he’s worried that US Federal Reserve policies dealing with inflation could lead the economy into a recession.

Despite all of the bad economic news lately, we’re fortunate that not all of the news is bad:

It’s All Up to You Now

It’s that time of year once again. It’s the season when most charities raise the most amount of money, perhaps because that’s when most fundraising activity happens. However, how tough will it be to raise money as the end of 2019 approaches?

You might be concerned about a recession on the horizon. You should be. We’re experiencing a record for sustained economic growth that quite simply can’t go on forever. A recession is bound to hit eventually even without factoring in trade wars, political turmoil, disruptions to the global oil supply, and the threat of foreign wars.

Among ultra-wealthy Americans, those with an average worth of $1.2 billion, 55 percent believe the US will enter a recession within the next year, according to the UBS Global Family Office Report. About 45 percent of respondents are sufficiently concerned that they are boosting their cash reserves, and 45 percent are realigning their investment strategies to mitigate risk.

While recession fears loom, a major economic downturn has yet to take shape. In other words, the economic climate is currently good from a fundraiser’s perspective. Could it be better? Sure. Always. But, it’s plenty good enough for you to anticipate a successful year-end fundraising effort. Consider some of the following six economic factors (as of Oct 4, 2019):

Gross Domestic Product. GDP is growing at a rate of 2.0 percent. Overall philanthropy historically correlates closely with GDP. So, if GDP goes up, we can anticipate that philanthropic giving will also increase.

Unemployment. The national unemployment rate is 3.5 percent, the lowest since 1969. If more people are working, more people will likely have funds with which they can donate.

Wages. Wages have increased 2.9 percent over 2018. Individual giving closely correlates to personal income. So, if personal income is rising, we can anticipate a rise in individual philanthropy.

Stock Market. The stock market, while volatile, has been performing well. This year, the Dow is up 13.92 percent, the NASDAQ is up 20.30 percent, and the S&P is up 17.76 percent. This is good for fundraising for two important reasons worth mentioning here. First, stock growth means that foundations and donor-advised funds will have more money with which to donate. Second, many individuals own stocks that have appreciated in value. When donating appreciated stocks, individual donors can avoid capital gains tax. In other words, even if someone can’t claim a charitable gift deduction under the current tax code, they can still derive a tax benefit by contributing appreciated securities.