tED magazine knows many of you are looking for both short and long term economic forecasts as a way to strategize over the next 30 days and then many months ahead.
As you might expect, there are a number of forecasts out there, and they vary from organization to organization. We think it is important that you receive as much information about the economy as possible, even though some of it does contradict. Here are forecasts from four experts, beginning with Brian Beaulieu, CEO at ITR Economics.
The general thrust of our messaging from last week remains in place. This is not turning into a redux of the Great Recession. News accounts advocating that the world is teetering on the brink of a Great Depression are inflammatory at best.
The changes:
- We have universally lowered the outlook for 2Q20.
- We are building into our GDP and US Total Industrial Production forecasts a 3Q20 low in the quarterly data. Their 12/12 rate-of-change and 12MMA lows will occur in early 2021.
- Retail Sales are now expected to slip below the year-earlier level through the remainder of 2020.
The constants:
- The trend ahead of us is not a redux of the Great Recession.
- The downturn remains relatively normal in duration.
- A recovery trend is probable for 2021.
- Not all businesses will be impacted the same way and/or on the same timeline.
- The size of the monetary and fiscal policy stimuli will no doubt help.
The orders to shut down businesses and the shelter-in-home mandates will likely be debated for a long time. The reasonableness of these actions will forever be a function of your perspective. A debate at this time is moot. It is incumbent upon business leaders to work the plan to not only navigate the near-term decline, but also position their businesses for maximum performance in the next rising trend.
Brian Beaulieu, CEO ITR Economics
Michael Marks with Indian River Consulting Group offers some best practices and a stress test so you can prepare for revenue drops between 20%-60%
So, what can and should companies do now when facing such uncertainty? Hopefully, every leader reading this has already addressed those concerns that are both urgent and important such as:
- Reinforced or heightened policies and procedures around hygiene for both personnel and physical assets
- Established and communicated policies around travel and time off both sick and personal
- Modified all outstanding orders in light of new expected demand levels of customers
- Acquired an understanding of all regulatory requirements concerning reporting of verified infection and symptoms as well as subsequent actions that would need to be taken
- Communicated with all stakeholders (customers, suppliers, lenders and employees) about all relevant steps being taken by the company to ensure safety and stability
Beyond the urgent and important, the next step is to stress test the business under various revenue levels. I’d suggest starting by building a proforma with revenue levels of 80%, 60% and 40% of budget through the next four plus quarters and deliberate on the appropriate actions to scale expenses accordingly. These are very difficult decisions that will ultimately involve dramatic payroll reductions. It is better to identify what you will do with forethought than under the gun. Which positions will be eliminated? Which positions will be considered for salary reductions or reduced hours? Can leases be terminated or adjusted?
Michael Marks, Indian River Consulting Group
Goldman Sachs is advising a significant drop in the GDP by as much as 24% in the second quarter.
We expect declines in services consumption, manufacturing activity, and building investment to lower the level of GDP in April by nearly 10%, a drag that we expect to fade only gradually in later months. We now forecast quarter-on-quarter annualized growth rates of -6% in Q1, -24% in Q2, +12% in Q3, and +10% in Q4, leaving full-year growth at -3.8% on an annual average basis and -3.1% on a Q4/Q4 basis.
Goldman Sachs
And Jackie Green, Director of Economics for ITR Economics reports on when she believes economic recovery will begin.
Despite the negative numbers, we can’t lose sight of there being some encouraging numbers, too. Reports out of China are stating that most businesses that survived the outbreak are operating again. Official reports are showing that utilization is increasing again, already at 70% or higher in most areas.
Make no mistake, China’s economy is hurting, and the pain will not go away overnight. Even as China’s Production comes back on line, the rest of the world is still grappling with COVID-19, which is reducing demand for Chinese exports. The US economy is projected to begin recovering late this year, assuming the COVID-19 situation is stabilized by mid-year. China will need its trade partners to be in healthier positions in order for economic recovery to be sustainable late this year.
Jackie Green, Director of Economics, ITR Economics
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