Navigating Growth During the Economic Sugar Crash

Everyone “knows” we’re in a recession except the economists. We feel the pain of collapsed 401k's, higher fuel and food prices, so isn’t that enough to declare a recession? And shouldn’t my business be hunkering down to ride this out?

In today’s chaotic economy, we are more likely to react to news headlines and stock market trends than market insight. We might completely abandon a core strategy, or delay critical execution tactics, based on the sick feeling in our guts. One way to solve this is by tapping the reliable data and forecasts published by ITR Economics.

Align Your Strategy to Economic & Market Forecasts

On July 21^st, ITR Economics held an event called, “The Threat of Higher Interest Rates – Driven by Inflation Pressures,” which was presented by ITR CEO Brian Beaulieu, and President Alan Beaulieu. A replay is available here ($199). They shared extensive, convincing evidence that inflation is peaking, disinflation is around the corner, and that the economy – while slowing – is not in a recession and is not likely to. Several points of evidence include:

• US Personal Consumption Expenditures Price Index (excluding food and energy) has likely peaked, and is dropping, now at 4.7%
• US Consumer Price Index to US Total Government Spending (which is a leading indicator) forecasts a precipitous drop within a year
• US Consumer Price Index to copper, aluminum, scrap steel and normalizing oil prices all suggest a trend towards disinflation
• Slowing economic growth is easing supply chain pressures

What does all this suggest?

• First, be careful with price increases. While prudent margin protection measures make sense, anticipating the coming disinflation could put you in position to be more attractive that your competitors.
• Pay close attention to your labor situation. There are less than 0.5 people available to fill any given job. Invest in the people you have (retain, reward), and look for new ways to automate, while leveraging the gig economy to your advantage.
• Watch inventory levels, as supply chain pressure wane, and demand in many sectors softens. Buying power has shifted significantly in many sectors post-stimulus. Don’t get caught off guard. If possible, target sectors that are still growing.

Hunker Down or Pursue Growth?

ITR’s forecasts show that most sectors of the economy, while slowing, are not expected to experience negative growth (a recession) in this cycle. If this is true of your sector, what does it mean? How should you align your strategy and execution tactics to capitalize on opportunities rather than simply hunker down? Consider how your competitors are responding. Perhaps as they take their feet off the gas pedal, you can capture more share by making calculated moves. Consider these questions:

• Should you adjust the markets you serve. Is this a time to move up market? Down?
• Is it time to accelerate your digital plans, making it easier for buyers to find and buy from you?
• Have the reasons buyers buy changed at all? Does your messaging need updating to reflect the true and current value you provide?
• Are your demand generation tactics delivering? What can you cut? Where should you double-down? Is it time to modernize your marketing and sales technology platforms?
• Do you have the right leadership in place to help make all these decisions in your organization?

Buffering the “Sugar High” Crash

I loved it when, during the July 21^st ITR Economics event, Alan Beaulieu referenced the overall economic situation as “coming down from a Sugar High.” Of course, he was referring to the repercussions of the massive economic stimulus program government deployed to buoy the economy through the peek COVID-19 impact. Surely, we shouldn’t be surprised we’re having to navigate these waters. Right? Optimistically summarizing our current situation, the macro economy is awaiting some normalization to regain its footing. And most businesses can still experience growth at this time. Like dealing with a real sugar crash, ingesting some solid food – boldly making fresh strategic assessments and investments – might just be the ticket to weathering the slow down, and positioning for further growth as we wade past the threat of hyper-inflation and interest rate adjustments. And there are winners and losers in every economic cycle. Substituting sound economic insight for media-driven emotional chaos is a great place to start.