2012 To Be a Recovery Year, Recession Possible in 2014

“2012 is going to be a recovery year … and it’s going be a year of economic expansion in the U.S.,” states Alan Beaulieu, the CEO of the Institute for Trend Research (ITR). Alan and brother Brian Beaulieu, the President of ITR, gave a positive outlook on America’s economy from 2012-2013 during a Dec. 16 Fridays with Vistage webinar.

The respected economists base their upbeat view of the economy on several factors including:

  • Positive rates of change in global industrial production, retail sales, commercial and industrial loans at commercial banks
  • Improving employment numbers
  • Decreasing rates of change in delinquency rates for commercial and industrial loans
  • Some upticks in housing starts and the Purchasing Managers Index

Trends indicate the economy will continue to improve through the first half of 2013 with the second half slowing down due to probable tax increases enacted in the beginning of the year. They predict a possible recession in 2014 but not nearly as dramatic as the one experienced in 2008. Although, several factors that could escalate it are the financial turmoil in Europe, tax increases, a rise in interest rates and a possible increase in a particular commodity price such as gasoline.

Businesses should take advantage of the positive climate in 2012-2013 but need to be mindful of 2014, the economists shared. Regarding preparation for 2014, Alan suggests that businesses should “grow market share . . . make sure you have enough cash and make sure your credit lines are where they ought to be.” They warn that producer price pressures due to inflation and increased demand could cause your cost of production to go up through 2013 but those costs can eventually be passed on to customers. Also, they say to be mindful of setting your price points too high going into 2014.

Alan and Brian encourage what they term as “make your move” items, which are those things a business needs to act on in order to stay competitive in a changing environment. As a result of an improving economy, the “make your move” items that a business owner should focus on are capacity constraints such as understaffing or inadequate training. Any constraints that a company is facing at the current level of business will be compounded moving forward as demand for products and/or services increases. Failure to address problems could result in delays to customers and the risk of losing market share to competitors.

Other factors business owners should concentrate on include: “positive leadership modeling,” “hire ‘top’ people,” “invest in customer market research,” “judiciously expand credit to your customers,” and “review and uncover competitive advantages.”

In regards to Europe’s current financial turmoil, Alan says that he’s “reasonably confident” that liquidity freeze-up will be avoided thus allowing a soft landing over the next couple of months. However, there is a potential that “unreasonableness fueled by fear and rumor” could invoke mass withdrawals at banks resulting in markets turning downward quickly.

Although they expect continued weakness in Europe for the first two quarters of 2012, the economists predict some rebound in the second half of the year. Also, the media’s attention has been focused on the financial weaknesses in Europe rather than the current strengths occurring in the U.S. and elsewhere in the world.

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