ITR Economics is the oldest, privately-held, continuously operating, economic research and consulting firm in the US.
To err is human. However, 2023 will be a better year for your business if you can avoid some missteps that – though understandable in a complex economic situation and with mixed signals emanating from the media – would prove detrimental.
If you’re visiting us at ITR Economics, chances are high that you do your homework before making business decisions. Here is a quick crib sheet you can take from us:
- The general macroeconomy (consumer and industrial sectors) will still be rising in 2023.
- Your individual markets may or may not all be rising in 2023. We can determine their trajectory, and we can be very specific. Sensitivity to interest rates and any COVID-Echo effects come into play.
- Inflation will generally ease next year, providing both potential margin relief and, as your customers seek commensurate relief on their end, new challenges.
- Pricing trends will vary by market, and we can get very specific about those, too.
- Labor will still be a pain point, both from cost and recruitment standpoints.
With the above information, get your plan together and execute. It is not time to batten down the hatches and ruminate excessively on the downside factors and risks. Rather, it is time to push forward with a bold and wise plan that anticipates growth while accounting for the downside factors and risks. The biggest risk is that the Federal Reserve could overtighten us into a downturn for 2024, but this is all the more reason to capitalize on growth in 2023. Further, the closer we get to the end of the 2020s, the less time there is to realize the gains that accompany macroeconomic rise before the second Great Depression hits around 2030. “Paralysis by analysis” is your enemy.
Action without analysis – or with subpar analysis – is also your enemy. In the absence of data-centric and impartial analysis, what would tend to color the decision-making process? The alternatives to accurate analysis are not good:
- The news media’s coverage, while oft times not wholly inaccurate, is typically incomplete and can be misleading – regardless of intent – on economic topics.
- You cannot simply take your growth rates over the past year and extend them another year forward. Linear planning is incompatible with an economy that moves in business cycles, and, depending on your markets’ trajectory, may lead to overextension or failure to capitalize on growth. For the overall industrial economy and consumer sector, we anticipate growth for 2023, but not at the rates of 2022.
Rather than rely on the media, your past performance, or “hoping for the best,” we suggest obtaining an accurate forecast and basing your plans on that.
Looking to the past
Neither the pre-pandemic economy nor pandemic-induced trends should serve as the basis for your 2023 expectations.
- Low inflation – relative to historical trends – characterized the 2010s. With some exceptions, consumer inflation trended near and below 2% during that decade. While we expect the current inflation rates – at 7.7% as of October – to continue to come down through 2023, we do not anticipate a lasting return to that 2010s environment. For younger business leaders, or for companies with a high percentage of millennial and Gen Z employees that will take some getting used to.
- Some companies (Peloton being an obvious example) and some industries (home exercise equipment, home furnishings, touch-free washroom fixtures, etc.) received outsize benefits from pandemic-related conditions. Trajectories are now normalizing, and it can be painful. Watch your exposure to such companies and markets.
Rather than rely on a “regression” model, consider the adaptability and ultimately the accuracy of rate-of- analysis. Interested in learning more? We can help.