Brian Beaulieu has served as CEO and Chief Economist of ITR Economics™ since 1987, where he researches the use of business cycle analysis and economic forecasting as tools for improving profitability.
Where we are today:
The general US economy is on the back side of the business cycle. This means weakening economic conditions, generally confusing news articles, and speculation about what it means for consumers, businesses, politicians, and retirees. It is important to note that not everything is going down; some industries are relatively acyclical or seem to be countercyclical. However, overall, we are seeing broad-based weakness encompassing leading parts of the economy (housing), coincident measures (GDP and US Total Industrial Production), and lagging segments (nonresidential new construction). The rest of the world is in more or less the same situation.
The chart below is one that our analysts/speakers at ITR Economics use to one degree or another. The chart shows the 3/12 rates-of-change for GDP and US Total Industrial Production. It is clear what the current business cycle status is today.
1. Focus on the decline because you are worried about how bad conditions will get. Doing this is normal, and it is what most business leaders do. It pretty much guarantees you will move with the herd. There is safety in that, in that you aren’t wrong if you move along with everyone else. The danger in that is you will miss the upturn in the economy because you are looking at today instead of looking ahead.
2. Look beyond the next two quarters and start prepping your teams, streams of cash, and channels for being busier in the second half of 2020 and for 2021. You do this by looking at the leading indicators. Look at our dashboard of indicators below. More of them are rising. You should know what this means to your company; we can help you if you don’t. The table below shows you the nine reasons to choose to focus on the coming rising trend. Our system requires a minimum of five indicators moving in the same direction to provide definitive input. We now have the nine you see below. Determine which markets are going to turn sooner, those that will turn later, and apply your resources accordingly, if you are able.
You will miss out on capitalizing on the rising trend if you wait until the turn actually happens before you lay in your plans.