The Whiteboard: Take advantage of forecasts and reports for economic information
Everyone who runs a business wishes for a crystal ball that would reveal the future.
It would also be nice to have a world-class economist on retainer to provide monthly forecasts of the local, national and global economy.
For most of us, both of these ideas are fantasies, but that doesn't mean we have to fly blind. A lot of good information is available at zero cost.
Every strategic plan should be built on informed assumptions, including assumptions about the future of the economy that might affect strategy or financial results. Similarly, every annual budget and every sales and income forecast should be grounded in the best possible information.
Unfortunately, what I see many business leaders doing is relying on anecdotes from their friends or from newspapers and TV.
The fact that Charlie Smith, who owns the small manufacturing plant across town, said his business has also slowed down in the last month is interesting. But it's one data point and usually is the result of a very casual "Hey, how's it going?" discussion. The same is true when it comes to asking a few friends or colleagues where they think the economy is going. There is no more depth to most of these interchanges than to a discussion of the weather.
Most newspapers and TV networks often report interesting things about the economy, but never a complete picture. They don't have the time or the interest to go broad and deep. They tend to report on things that make a good headline and move quickly to something else.
The Internet makes it possible for all of us to quickly access much more in-depth analysis, including both recent trends and future forecasts. In the short term, trends can be useful, because the near term often reflects the recent past. But we don't have to stop there. We can get the forecasts by world-class economists and the results of controlled surveys of hundreds of Charlie Smiths to find out what they are seeing and what they expect in the future.
For economic indicators showing recent trends, there is no better source than the Economics and Statistics Administration of the U.S. Department of Commerce (www.esa.doc.gov). This organization gathers and posts links to economic data from the Commerce Department, the Census Bureau and the Bureau of Economic Analysis.
Information available on these websites includes reports on orders for durable goods, retail sales, construction spending, gross domestic product (GDP), manufacturing activity and home sales. Not only is it easy to navigate the websites, but you can also get regular, free email updates simply by supplying your email address.
Forecasts come in two forms: analysis by economists and surveys of broad samples of business leaders. Sources of both abound, but I've found a few with free reports that are authoritative, contain information that is actually useful, and are easy to access.
For a broad brush on key indicators, I turn to the Philadelphia Federal Reserve's (www.philadelphiafed.org) quarterly, "Survey of Professional Forecasters." This gathers inputs from numerous forecasters on GDP, unemployment, and consumer prices, currently extending through 2014.
Securities firms are a great source of detailed analysis. I use the "Monthly Outlook" report found on the commercial page of Wells Fargo Securities' website (www.wellsfargo.com/economics). It includes narrative summaries for both the U.S. and international economies and extensive tables of forecast data, currently through 2014. The U.S. forecast includes more than 40 line items, including GDP, business investment, construction, exports, inflation, industrial production and interest rates.
At a very high level, both U.S. and international forecasts are available from Goldman Sachs (www.goldmansachs.com) in its "Focus On" series of video presentations. The International Monetary Fund (www.imf.org ) publishes a quarterly "World Economic Outlook" with forecasts of output, trade volume, inflation, interest rates and commodity prices for the key advanced and developing economies.
When I want the opinion of many business people, I typically turn to two reports. The first is found at the Research Foundation of the National Federation of Independent Business (www.nfib.com/research-foundation). The monthly "Economic Trends" report provides insight into the thinking of a large sample of business leaders. The current report is the result of 1,615 survey responses. It includes an Optimism Index made up of 10 components, including plans to increase employment, expectations for the economy to improve and sales to increase and whether now is a good time to expand.
To focus on manufacturing and our regional economy, the Philadelphia Federal Reserve's monthly "Business Outlook" is a great source. It is a survey of manufacturers that looks at current numbers and offers a six-month projection. It is far broader and deeper than random conversations with friends.
Twenty years ago, forecasts and surveys were expensive. Now they are free. Take advantage of these suggestions or find your own. There are many more out there.
Richard Randall is founder and president of management-consulting firm New Level Advisors in Springettsbury Township, York County. Email him at firstname.lastname@example.org.