With a reputation as an accurate, straightforward economist, Alan Beaulieu has been delivering award-winning workshops and economic analysis seminars across the world to thousands of business executives for the last 30 years.
There is a pessimism building in the business and banking community. That pessimism leads some noteworthy institutions to project a recession in the US later this year. There is also pessimism in the business environment, which is manifesting as a decline in confidence. Please do not get me wrong; I can understand where the growing lack of confidence comes from, and there is no need to disparage those that collect and report the data. My only issue is that you, as a business leader, may fall victim to that decline in confidence and therefore participate in unnecessarily pessimistic groupthink. Now is not the time to tighten up your asset deployment; indeed, now is the time to strategically expand resources for maximum gain.
The chart below highlights the danger in following confidence indicators too closely. The blue line is the monthly data for a business confidence indicator and the green line is the monthly trend for US Industrial Production. There are three low points, highlighted by the red circles on the chart. The lack of confidence (pessimism) lasted longer than the economic downturn. You will also see that there are times when the confidence barometer declines for an extended period and US Industrial Production keeps on rising. The lack of consistency is why we feel measuring confidence does not constitute a good basis for action.
Decisions are best based on reliable, proven empirical evidence. ITR uses a plethora of mathematically derived leading indicators with known, provable, lead times to US Industrial Production and to thousands of other data series that span most industries and most economies. Indicators such as business confidence have their own utility at times and for specific purposes, but we caution against using confidence as a sole source of insight into the future. Please visit our website to learn how to use rate-of-change methodology and leading indicators so you can see the future with certainty.
Now to the matter of strategic deployment. A decisionmaker who is uncertain or pessimistic will tend to "keep their powder dry" as they wait for a better day. The decisionmaker who looks at the correct indicators will act before the one who is holding back. The leader who deploys resources now into training programs, employee involvement and culture, marketing messages that are crafted for an expanding economy, new product deployment, automation, efficiency gains in all departments, and perhaps acquisitions, will find that he or she has the jump on the slow-to-turn competitors, and he or she will reap the benefits in profits and market positioning. The leader who waits will play catch-up for years to come. Watching the right leading indicators makes all the difference in the world.