20 Must Know Economic Insights for Every Business Owner
Featuring insights from Brian Beaulieu - Founder of ITR Economics
Let me start by sharing that I am not an economist. That said, I am in the presence of and work alongside business owners – of all sizes and industries – virtually every day.
In my view, a small part of my role for clients is to acknowledge, vet. and share valuable insights when I come across them. This is the case with this piece.
Just over a week ago I attended an event at which Brian Beaulieu - Founder of ITR Economics – spoke. Brian shared over an hour’s worth of current and critical economic insights - and some thoughts around what to do about them - with the audience,
For background, Brian and his team at ITR Economics gather, analyze, and provide economic trends and insights – and have been doing so with incredibly good accuracy - since the 1940’s.
If unfamiliar with their work and products, I encourage you to check them out at www.itreconomics.com when you have a moment.
Below are a series of bullets, thoughts, quotes, and actions to take from the talk. I hope you find them of value.
The US Economy
- During 2019, the US GDP will grow, but expect slower growth than in 2018. Many businesses experienced great growth in 2018, largely driven by an active and expanding market. In order to match the same pace of growth in your business - as you had in 2018 – it will dictate it come more from internal efforts (better efficiency, more productivity, price increases) vs. external market forces.
- In 2020, indicators predict the GDP to continue pointing up.
- Expect a hard landing in 2022, the toughest since the recession. It will be manageable. Nothing like the 2009-2010 recession.
- Are you over 57? If so, don’t worry about another recession like what you experienced a decade ago. It isn’t going to happen that way.
- Under 44? You are not so lucky. Expect a real mess around 2030. Leading indicators suggest some bad stuff is looming (i.e., national debt load, China’s economic regression), but it will take time for it to develop. Invest in technology and ensure you have enough capital to invest in your own growth.
- Re: the impact of the corporate tax rate cut on capital expenditures…it will be nil. Businesses don’t make decisions on short-term things like a tax break, especially when the rug can be pulled out from underneath it. Reality is roughly 50% of businesses used the break to buy back stock, 25% invested in employees, and 25% went to capex.
The Global Economy
- The US represents 24% of the global economy - and it is growing. The US will be #1 in economic growth for the next 100 years (well, quite a while anyways).
- China represents 15% of the global economy and it is tapped out.
- Why? The US population is growing. A new baby is born every 13 seconds. The US is producing more FCU’s (Future Consumer Units) than any other country in the world. China is slowing.
- On the subject of tariff’s, prices will rise, profits may not. Have a strategy for inflation. Have a strategy for how you will grow profit in a world with higher prices for everything and a tight labor market. Invest in automation where you can.
The Financial Markets
- Even though we’ve had a stall in the market recently, the overall rate of rise is very normal. For now? If you need to, take cash off the table – do so as tax efficiently as you can. Be patient. No need to try and get ahead of this market (attempting to buy low). Wait for the market to come to you. ITR doesn’t believe the current correction is at its floor yet.
- Mortgage interest rates are on the rise (as you know). They will continue to rise. This is still a great time to buy a house.
- In general, if you are going to borrow $, borrow it at a great rate right now, before the rates go up.
- Our great state’s population growth rate is 5.1%. We’re a growing state and that is good for the future of business. We also have the lowest state unemployment rate in the country. The tight labor market won’t lessen anytime soon.
- The housing market is weakening (new residential construction starts). Home prices continue to rise and are expected to go strong until 2030.
- Non-residential construction market is getting stronger.
- Unemployment rate in MN will continue to decline. Attack with investment in automation where possible. To protect and grow profits will require investment in training and increasing prices.
The Millennial and Next Generation Impact
- Are great systemic thinkers and need to know something about your cause to be attracted to your business. They are a very cause-conscious, philanthropic generation.
- Gen Z, or the Next Generation, is beholden to no one and capitalists to the core. They intend to make their own way.
- It will be increasingly important, and advantageous in the future, to be bilingual (French preferably as many view Africa as the next China) as well as strongly versed in Math and Science (STEM). Why French? Leading indicators economists study point to Africa as the next China and French is the most common language of Africa. French is also widely known throughout Asia.
While interesting insights, I encourage you to dig deeper, study the indicators for yourself, and always balance what you hear with real facts and data.