Can an economic forecast help a business?
Monday, 18 November 2019
As a business owner, you are keenly aware of your immediate marketplace.
You can likely name your top 10 competitors by heart, relay past years' revenues without hesitation and easily identify your primary customers.
Somewhere among the laundry list of items you have cycling through your brain is the state of the U.S. economy. While many companies have a forecasting group that looks for changes on the horizon that can negatively or positively affect business, some look to full-time economists to help navigate the landscape and chart a course.
For instance, the BBVA U.S. Economic Research team, led by Executive Vice President and Chief U.S. Economist Nathaniel Karp, produces multiple economic forecasts, free of charge, for its clients several times a year. These forecasts are not only useful for Fortune 500 corporations, but also for family-owned businesses, all of which are subject to fluctuations in the market.
“We will have meetings with clients and present our outlooks so they can get ideas and insights for how to build market information into their business scenarios," says Karp. “The usefulness is that our forecasts offer an objective perspective; we tend to be very detailed and provide a great deal of analytics behind each one."
Factors impacting forecasts
So which industries are up and which are down?
The answer isn't cut and dry, says Karp, and there really isn't a designation of specific “good" or “bad" industries. Key considerations are the driving forces impacting the market and how those may affect individual businesses.
Major cultural shifts in the U.S. are impacting hundreds of industries. Some of those shifts have been centered on changing populations and the influx of technology in our everyday lives.
“Our aging population is impacting many companies as more people move into the 65-and-older bracket," he says. “This is creating opportunities in healthcare, wealth management, and even recreation because people are living longer."
On the tech front, Millennials and Generation Z (born between late 1990s-early 2000s) are relying on mobile more than ever before. “They, as well as older generations," says Karp, “are using smartphones to consume goods and services. They are buying things online instead of going into stores, which is impacting a variety of industries."
The energy and food sectors are also adjusting to changing consumer behavior.
“There are major technological changes around the production of energy, and many traditional firms have had to adjust with increased investment in alternative energy sources," he says. “A lot of that comes down to infrastructure, and companies have been taking notice."
Meanwhile businesses in the snacking and restaurant industries have been making changes to meet demand for more healthy, organic options. “Many companies are benefiting from this, but fast food chains, for example, have needed to adapt to such major cultural changes," Karp notes.
Even the transportation and lodging industries have been impacted by major macro shifts by the presence of companies like Uber and Airbnb. An economic outlook can help a business understand whether shifts like these will result in a ripple - or a tidal wave - of changes for an industry.
“It's good to establish a benchmark of how you expect your company to evolve over time, but then use forecasts to identify strengths, weaknesses, opportunities, and threats in the marketplace," Karp says. “These are things that can impact your cash flow, sales, fees, taxes, regulations and costs. This is important stuff."
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates. All accounts and credit are subject to approval, including credit approval. BBVA and BBVA Compass are trade names of BBVA USA, a member of the BBVA Group. BBVA USA is a Member FDIC.
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