Most budgets for 2013 were made in 2012, when the prevailing economic outlook was grim. But here it is midyear and the signals are decidedly more positive. Don’t let yesterday’s mindset prevent you from seeing what is about to unfold. Those who fail…
There is ample evidence that things are better, trader-driven stock price gyrations notwithstanding. Housing prices have stabilized and are increasing in some regions. Personal debt has declined. Manufacturing is on the rise, exports are picking up, and the US continues to be the top target for FDI.
And there are plenty of reasons to be optimistic about the economic outlook for the next five years. The shifting energy equation, for example, sets the stage for growth. Shale gas will allow the US to be energy independent, create an export industry, and reduce energy costs. Lower costs are already making some industrial sectors more competitive.
Another compelling if intangible reason to believe that the economy has turned the corner is America’s resilience. The societal factors that have made America strong in the past continue today: its diversity, thirst for innovation, entrepreneurship, and institutional support for risk taking. Banks are now adequately capitalized and are beginning to lend, and venture capitalists are as hungry as ever. Even gridlock in Washington has not stopped the economy from progressing.
Granted, it’s not a perfect picture. Europe, excluding Germany, is still struggling, it’s unclear whether Abenomics can pull Japan out of its slump, and the shrinking Yen could nick the US auto industry. The big drop in demand for major commodities like iron ore and copper has exposed excess capacity and caused painful plant closures, hitting Australia especially hard.
These and other countervailing forces will not, however, stop the US recovery and the synchronized recovery of economies around the globe. Even a small increase in US personal consumption is a huge absolute number — and that spending can spur exports from China, Brazil, Japan, Canada, Europe, South Korea, Mexico, and Singapore. The rating agencies reinforce this point of view. Just this month Fitch raised its rating on India’s sovereign debt and Standard & Poor’s raised its long-term outlook on the US. Ratings on other countries and companies are more likely to improve than deteriorate.
If your budget was created for economic headwinds, then now is the time to revisit your assumptions. Here are some steps you should take to build for 2014-2015:
1. Position yourself in market segments that will grow. The landscape has undergone major transformations since the global financial crisis. The recession eliminated some market segments and redefined others. This is the time to revisit the market spaces you occupy and position yourself to ride the uptick. You should be exploring new segments and experimenting with new ideas to expand your brand and occupy the space. For example, the wealth effect from rising equity and real estate prices might make premium product segments more attractive in the coming years. Get there ahead of the competition, and be sure your assignment of resources matches up with your growth prospects.