LEADING INDICATORS – HOW READING THE FUTURE HAS GOTTEN A WHOLE LOT COMPLICATED

Even under normal situations leading indicators sometimes contradict each other and have limited use for quantifiable strategic planning. Each industry has its own set of leading and lagging indicators. Tech industry itself serves as a leading indicator for the economy.

There are now new complications that have made the task for economists, forecasters, and strategic planners even more difficult. They include –

1. Covid-19 effects – continuing, though less fearsome.
2. Supply chain disruptions – with no end in sight.
3. War in Ukraine – impacting far beyond the immediate battle scenes.

The cumulative effect is causing uncertainties and contributing to a rare set of unprecedented economic conditions, sometimes contradictory in nature-

1. Consumer confidence is at the lowest in a decade but restaurant reservations, airline bookings, and travel plans are at an all-time high.
2.  After two decades of stable prices, inflation is here. Federal Reserve’s plans to rein in inflation with high-interest rates (a bit too late) are yet to significantly impact the housing prices or the market.
3. Unemployment is at an all-time low, and wages are continuing to go up
4. Majority of CEOs of major companies feel that we are headed towards a recession and may have brought the date forward by clamping down on expenses.
5. Supply shortages are showing up in unheard-of areas like infant formula to coffee creamers.

Given the above scenario, it is a safe assumption that economic slowdown/recession is on the horizon. Unfortunately, it is not going to be the typical recession of the past when everything goes thru a predictable cycle. There is going to be a recession and “reset” of the economy, and you can expect the following-

1. Supply chain adjustments will continue over the next 5 years as we bring manufacturing close to home — away from China in particular.
2. World economic order will change with Europe moving away from Russian energy sources (not an east short-term task) and Russia forced to look East for new trading relationships
3. The top two spots in the world economic, political, and military ranking clearly now belong to USA and China. Putin has taken Russia economically backward with his Ukrainian misadventure and made Russia politically weaker.

While one should still look at traditional economic leading indicators, one must take into context how each industry will fare in the new economic and political order. Political leaders and corporate decision-makers must consider the following as we approach the coming economic slowdown-

1. We need to source all-important computer chips and semi-conductors closer to home
2. Essential medicine and medical protective gears need to be made in North America
3. Education sector needs to train people with employable skills with accelerated online programs
4. Public health policies need to be developed for protection from another pandemic or for a coordinated response among states

The needs of the country and the economy are clear. What is unclear is how our government and corporate leaders will respond.