The Current Economy: Robust or Slowing?
December 27, 2019
Hearing claims that the economy is robust, but experiencing the opposite? Tune in to this week's TrendsTalk to learn how the current slowdown is impacting businesses.
Transcript by Rev
Hi, this is Alan Beaulieu, President of ITR Economics with today's TrendsTalk. I want to talk to you about what's happening in the economy now and what to expect as we go forward, but in a particular direction. Yesterday, which would have been the 16th of December, I was looking at the Wall Street Journal online, and twice in one article it said that the U.S. economy was robust, twice! And I thought, "What are they talking about?" And then I thought of you and I thought, "I wonder if there are people who read that going, well, why aren't I feeling that? Why is it that my industry, my business isn't going robust? Is there something wrong?" And the answer is, "It's not you, it's the Wall Street Journal". The economy is not robust. As we look at GDP, on a deflated basis as our metric, the growth rate has gone down to 2.1%; that is not robust. It's the lowest growth rate we've seen in 30 months.
The peak growth rate, that we last saw, was in June, 2018 at 3.2%. So the economy has been slowing down in its rate of rise. I look up "slowing down in its rate of rise" in the dictionary, I get deceleration, I don't get robust. So if your business has been decelerating, whether you're a service provider, whether you're in a B2B, B2C, if you're just been feeling a thing, more and more headwind, you're perfectly normal, you're tracking with the economy. It would be perfectly normal for this slowing rate of rise, this deceleration to last another six months. They decline, so far, in the 3/12 rate of change is very typical at 15 months. What we need to do is understand that another six months would be normal.
We're not going to see another six months. You're going to see the rate of growth trough. We believe we're forecasting around March, 2020, give or take a month or two. Now, that's important. As the economy continues to slow, and we may see a negative rate of growth in the first quarter of 2020, the newspapers, you can tell my age when I say "newspapers", the media will have themselves a field day over the economy slipping into recession. The politicians will make great, great headlines out of all this, but understand please, it's not going to last. We are coming to a trough in the rate of growth is going to slow in the first quarter, may go a little negative for that quarter. Don't be alarmed. We have 10 out of 12 leading indicators on our dashboard that are saying accelerated growth. So what I'd like you to concentrate on instead is getting ready for the next rising trend.
Please make sure that you're thinking, "All right, what do I need? What kind of capex spending must I do now to solve the bottlenecks I had in 2018 or 2019? Should I be deploying new technology? Am I able to spend the money?" If you are, spend the money, get ready now to be busier in the second half of '20 then '21. Are you looking at delivery problems? Are you're looking at systemic problems, fix them, get things working right because you are going to be busier and you need to get it squared away now so that you can enhance your profits, enhance it and gain market share, and make sure that you are well ahead of your competitors. Because come the first quarter of 2020, right around the corner, they're going to be hunkering down going, "Oh no", and you're going to be going, "Oh yeah". I know we're going to get ready for a better future and you're going to be ahead of the game.
If you want to know more about how you fit into the economy, we can help you with that. Just get in touch with us here at ITR Economics and we'll be happy to show you how to do it or go to our website, itreconomics.com and there is a video there for you on rate of change and leading indicators. Thank you. I hope you have a great day.