October 14/21, 2019: Volume 35/Issue 8
By Steven Feldman
It’s been awhile since we checked in with our favorite economists, the Beaulieu brothers from ITR Economics in New Hampshire, the oldest privately held, continuously operating economic research and consulting firm in the U.S.
Since 1948, the company has provided business leaders with economic information, insight, analysis and strategy. It has an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Thus, with an accuracy rate hovering around 95%, we look to them to get a feel of what the immediate future may hold for our industry.
Right now, Brian Beaulieu, CEO of ITR, advises business owners, if they have noticed the business slowing down or activity becoming spotty, to plan on working through the slowdown phase of the business cycle through the first half of 2020. Keep track of the leading indicators and strategize about what resources you are going to deploy during the rising trend that ITR is projecting to begin in the second half of 2020.
While unemployment remains at historically low levels, it is no secret that the U.S. economy and global economy are slowing down. Outright contraction was evident with some of the recent data, but ITR believes “deceleration or flat-lining” is a more apt description of what to expect for the economy through the first one to two quarters of 2020. ITR advises businesses should have already planned how to protect profits based on that prior forecast.
But here is the great news. It is now time for you to think one-half business cycles ahead and plan what you are going to do for the next change. The next shift in the business cycle will be one of accelerating rise. Recovery in the second half of 2020 will quickly give way to a U.S. (and global) economy that is gaining ground on the upside of the business cycle. ITR is currently scouring the leading indicators in anticipation of seeing empirical data to support its upside forecast for the second half of 2020 and all of 2021. It has three leading indicators that provides reasonably solid positive signals for the next ascent. It needs two more before its confidence level goes into normal territory.
ITR Economics will be able to measure the performance of the upside leading indicators and come to some statistically reasonable conclusions once it has the five positive leading indicators in place. It will develop a working model based on empirical data on the 2020-2021 rate of growth for such indicators as retail sales, total industrial production and GDP.
Right now, ITR’s theoretical input to the next rising trend is suggesting the cyclical ascent will be milder than many people will expect. That means you will need to carefully calibrate your talent, working capital and geographic reach to get the most of the ascent without outrunning the cycle as the probable recessionary downside of the cycle develops.
For some of us, that very specifically means don’t overinvest in what we currently do. Rather, invest in leveraging resources to develop the means to stay out of the next recession. You can beat the cycle by selling new products/services other than what you are already doing or moving into a new demo- graphic or geographic market.
A frequent question these days is how the 2020 elections might impact the forecast. ITR advises not to worry about the election; it is the business cycle that is going to drive your business up and down in the 2020-23 period.