with connor lokar


As businesses focus on budget and planning season, many are struggling to make sense of the current state of the economy. See why you should keep your attention on what you can control with the latest episode of TrendsTalk with ITR Senior Forecaster Connor Lokar.



The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.

Hello, everyone. Connor Lokar, Senior Forecaster here at ITR, and I’m happy to be back here with you on this latest ITR Trends Talk.

So today we’re going to be talking about what we can control and what we cannot. Many businesses right now, they’re in their budget and planning season as they try to make sense of what is happening out there in the economic world, and they’re probably having a tough time with it. Their backlog is telling them one thing, their shipment trend is telling them another, and their sales team’s probably telling them something else, maybe some whispers of some slowing new business and bookings trends. And all while that’s happening, externally the headline environment is chaotic, messy, confusing, and it makes for a rather paralyzed planning process as businesses look at 2023.

The big paralyzing narrative at the moment is Fed Watch 2022, as everyone waits with bated breath for what the Federal Reserve is going to do with interest rates and to the economy and their markets. ITR CEO and Chief Economist, Brian Beaulieu, actually just did an excellent roundup on where interest rates and yield curves stand as of early October in one of our recent TrendsTalks. So I would recommend you pop over there if you have the time. But the reality is you cannot control what the Federal Reserve does. ITR cannot control what the Fed does. We might wish we could some days, but it’s outside of our powers, at least for now. So what we have to do is look inward and look at data relevant to our businesses and what it is telling us right now.

The reality is that most businesses that positively correlate to the economy are in for a slower growth year in 2023. That much has already been laid out in the leading indicators that we track at ITR, and whether the Fed tightens more this fall or calls it quits at their next meeting, they’re likely to see a slowing macroeconomic trend throughout the majority of next year. It’s our opinion that whatever the Fed does next really is going to have more of an impact, maybe creeping into late 2023, but likely more so in 2024 at this point as these interest rate trends generally take a little bit of time to break the less interest rate sensitive portions of the economy.

On the other side of that coin, [inaudible 00:02:19] housing, they’re both fortunate and unfortunate at the moment. They’re fortunate in that they are leading into a leading sector, one that is both leverage dependent and interest rate sensitive. So they can already see the interest rate impacts on their markets. They’re unfortunate in the Federal Reserve’s already broken the rising trend in housing, but they can proceed with a little bit more clarity for 2023, and it’s likely going to be a softer year overall for their business and our landing potential, very likely if they’re very dependent on the single family market.

But whether the Fed breaks the rising trends in CapEx, consumer spending, the general economy, that still remains to be seen for right now. For heavy backlog business, it’s increasingly probable that what the Fed does next really is not going to impact you until 2024 as you’re likely to roll over, enough past due business into 2023 to more than offset any late in the year bookings contraction that might show up. So while we wait for clarity on the rate path, again something we cannot control and potential downside for next year and 2024, we need to focus on controlling what we can control and answering questions that we should already know the answer to at this point. Are you going to roll over quite a bit of backlog into next year or not? Are you an interest-rate sensitive business or not? Do you have the economic data to even answer these questions?

ITR can always help in that department, but really we need to focus on being the best, maximizing, or at least retaining market share, we need to control what we can control, focus on execution and delivery for 2023 as those are going to be winning traits as some demand ponds start to dry up and some over-ordering starts to clear the economic system. Control what you can control, answer the questions, and plan as best as you can right now and the rest of the answers are going to come in due time. Thanks for stopping by. We’ll see you on the next one.