April 14, 2023

Hello everyone. Connor Lokar, senior forecaster here with ITR Economics, joining you again for another TrendsTalk. So, as most of you’ve probably heard by this point, ITR Economics is projecting a mild recession for this cycle, starting to come on late in 2023 and really characterizing the majority of 2024 before we transition to recovery towards the end of next year. And most business leaders that we present to or we work with directly appropriately see that as somewhat alarming, and it likely dims their expectations for their own businesses as we look at slowing growth this year and some mild decline in 2024. But the question is, if the economy goes into recession, is it a requirement for your business to do so as well? My answer would be no, that the individual business level recession is not always required. It is sometimes optional, but there’s several factors at play.

Obviously we’ll go at both ends of the spectrum. There can be outliers, some businesses can just be blatantly countercyclical, so recessions actually help their business and help their sales process for whatever their product or service actually is. Then in recessions of a very significant and prolonged recession like the Great Recession, looking back more recently, avoiding decline entirely in a cycle like that, that can be a tall task. And really mitigating the magnitude of decline can be a more reasonable goal than dodging it all together. But when we think about a mild recession like the one that we’re projecting for next year, something more akin to, say, the early 2000 cycle or the early 1990s cycle, I think recession is optional for this particular cycle, but it really comes down to how are we proactively managing to avoid it?

And this goes to a core conversation that we have with our EVP consulting clients at ITR that we do revenue forecasting or could be bookings or shipments or whatever else, but let’s say revenue, that we do forecasting work for on an individual basis. And we always tell them, “This is a forecast, this is a market-based forecast. This assume some consistency.” So, if you just kind of maybe not necessarily take your hands off the wheel, but more or less on cruise control and ride the economic road wherever it takes us, it’s probable. And as we started to change some of our client forecasts, that they will experience some mild levels of decline in 2024, both on a volume basis and likely on a dollars basis as well. But what we’re projecting largely are mild declines, which means with some management and some avoidance tactics that could be taken off the table, we could battle to flat, we could battle to mildly positive.

But it’s going to require perhaps pulling levers maybe that we’re not historically used to doing. If we are gaining enough share to offset what we think will be market-based decline, if we are introducing new products, new services, if we are entering markets that we do not historically operate and something to change what has been the historical norms for us, then perhaps recession can be optional for 2024. So, as we think about this forthcoming cycle, I don’t think it’s required that we resign ourselves to a fate of decline next year and really thinking about what ways can we mitigate and perhaps entirely offset some of the mild decline likely to be yielded in 2024. So, think about you, think about your business, the markets that you operate in, and perhaps markets you may might like to enter next year. And ask yourself, can recessions be optional? I think the answer is yes. Thanks for stopping by, and we’ll see you on the next one.