What's Really Going On Here?

“An economist is a surgeon with an excellent scalpel and a rough-edged lancet, who operates beautifully on the dead and tortures the living.” --Nicholas Chamfort (French Writer, 1741-1794)

I think many people today can identify with this sentiment.  Are we in a recession or are we not? How can we tell and when will know? “Recession” is a broad economic term that is best applied to the economy at large, so “no, we are not in a recession in the United States.” GDP grew in the first quarter of 2008.

There is a more important question: Are you in a recession? Is your company experiencing the pains of a downturn, because in the final analysis, that is the only downturn that matters.

You can determine if you are in a recession by computing your company’s revenue growth rate through time. E-mail me at the address shown below and I will send you our free Technical Reference Manual, which will tell you how to compute your position in the business cycle. Once you know where you are, it is much easier to assess where you are going to be and how best to prosper between here and there. There are key Management Objectives that each business leader should be considering based on where you are in the business cycle and where you want to be a year from now. The manual will bring a lot of these Management Objectives into practical focus.

“Will oil prices stay high?” is an oft-heard question. It would seem that there is very little reason to expect a dramatic systemic pullback in prices. Global demand is strong, especially in China and India, and there are no indications of a slackening in demand any time soon. Concurrently, supply is constrained by a number of factors, including wellhead production, delivery systems and refinery capacity. Add in a generous portion of political uncertainty in key oil producing nations and it becomes hard to expect oil prices to be anything but high.

“When will the recession in the housing industry end?” is another common question for our road team these days. The answer is in large part dependent on where you live, as not all regions are going through the same decline; indeed, some regions are seeing price appreciation! A regional or state assessment is the only way to assess the potential impact on your castle. Nationally, there is a lot of inventory left to be soaked up, and therefore, the market is at least four to six quarters away from seeing an end to the troubles.

Have you considered that we are nearing a time when you may want to consider buying real estate? If you want to try and time the low, then wait a while. For others, and especially for those in the Midwest, now is a good time to give this idea serious consideration, especially if you plan on living in or on the property for the next four to five years or longer. The long-term demographics for the United States point to increased demand for housing, especially in light of the economic growth we are projecting will occur beginning in 2011.

We at ITR firmly believe that there is a painful recession coming, but we also think that you can prepare for it in a positive way that will allow you to protect your company, jobs and futures. Business leaders are faced with two choices: let the future happen and hope for the best; or plan, prepare and prosper despite a challenging economic environment. The latter course takes effort and determination, and a dash of daring, but the good things in life often do.

The future is your decision.

Alan Beaulieu, alan@ecotrends.org, is Senior Analyst, an economist and a Principal with the Institute for Trend Research, in Concord, N.H. He invites your comments.
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