Economist Alan Beaulieu shared some good news as well as a warning in a recent Rural Lifestyle Dealer podcast. Here are some highlights about his forecast for a softening economy in 2019 with a good momentum into 2020 — leading up to a great depression in 2030. (Listen to the entire podcast here, http://bit.ly/RLDEconomicForecast.) Beaulieu is president of ITR Economics, which was founded in 1948. He is a senior economic advisor to a variety of trade associations and is the author of the book, “Prosperity in the Age of Decline.”
Rural Lifestyle Dealer: What are you seeing for the short-term and how can small businesses be ready?
Alan Beaulieu: The U.S. economy is going to expand into the first half of 2018. When I think of the economy, I’m thinking about the gross domestic product. Then, it’s going to flatten out, with a little bit of softness that will extend into 2019. By mid-2019, we’ll see the economy begin to pick up speed on the GDP basis and we’ll head into 2020 with nice momentum.
When you head into a softer economic environment, your first responsibility is to cash. Make sure you are not spending cash you should not be spending. During a softer year you should also ask yourself, “What do I need to get ready for a busy 2020?” We’re talking about efficiency gains.
RLD: You are forecasting a major downturn, a great depression in 2030. How can small businesses prepare for and weather that cycle?
Beaulieu: Businesses can prepare for a Great Depression in the 2030s by looking at their clients and saying, “Is this client in an industry that is going to get hurt?” If so, then by late 2020, they better be replacing that client with one in an industry that is not going to get hurt. For instance, client “A” may be profitable and somebody that you might have a long relationship with, but client A may not survive. And, if they do survive the great downturn, they may be giving you less business.
It’s easiest to just believe that it’s not going to happen and, therefore, businesses don’t have to do anything. However, when you see interest rates continuing to climb, that certainly means there is going to be a contraction in the housing and automotive industries. And, when you look at trends and historical guidelines, you can see that before a dramatic fall, there is this period of prosperity. During those times, some are lulled into complacency and those are the businesses that tend to fail.
One other way to prepare is to think about when you might want to sell your business. The late 2020s would be a good time to sell the business if you are considering that option.
This story is an excerpt from the feature, "Seize the Opportunities Ahead," in the winter edition. Read more.