The COVID-19 pandemic has triggered many business closings this year, but at the time of this writing, a U.S. economist was predicting that the economic downturn will not be as deep or long lasting as that of 2008.
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In a webinar recently sponsored by North American Wholesale Lumber Association (NAWLA), Alex Chausovsky, an economist at ITR Economics, urged business people to prepare for the resumption of positive fiscal growth in the second half of 2021
“You need to use a balanced approach in your decision making,” he advised. “It needs to be a tightrope that you walk between dealing with the difficulties and headwinds that you are encountering in your business today, whether that has to do with cash flow management or production capacity planning, and not losing sight of preparing for tomorrow. You’ve got to be looking for opportunities.”
Chausovsky noted that:
• Highly qualified people are looking for jobs, so it might be a good time to replace any low-performing employees.
• The best time for acquisitions is at the low point in the business cycle, when valuations are low, so now is the time to be researching potential M&A targets in preparation for “pulling the trigger” in early 2021.
• A low point in the economic cycle is a good time to make capital investments to position your business for future success.
• The trade war with China and the COVID-19 pandemic have exposed gaps in supply chains that new businesses might be able to fill. Be proactive in capitalizing on these opportunities with new and existing clients.
At ITR Economics, Chausovsky uses a dashboard of about a dozen leading indicators, such as the Purchasing Managers Index and Total Industry Capacity Utilization Rate, to assess the likely future performance of the economy. All of the indicators were rising in January, but declined after the pandemic began unfolding and oil and gas prices collapsed. At the time of this writing, nine of those leading indicators were increasing again from their April lows, he said.
“The green shoots are clearly there,” Chausovsky said. “We definitely need a couple of more months of rise from some of these leading indicators to persist, but at least the first sign that the worst is behind us is visible in these nine leading indicators.” He later added: “It’s going to be at least 12 to 18 months before we get onto some sort of normal footing relative to where we were before the downturn. The industrial economy will take longer to come back than the consumer one.”
Since 1948, ITR Economics has provided business leaders with economic information, insight, analysis, and strategy. Learn more at www.itreconomics.com.
NAWLA is a trade association that delivers access to relationships and resources that improve business strategy and performance through sales growth, cost savings and operational efficiencies for wholesalers and manufacturers of forest products and other building materials that conduct business in North America. Details are available at www.nawla.org.
