4 Unusual Economic Indicators For The Small Business Owner

by Doug Smith, President, The Woodhaven Group

Oh, if we could only predict the future!

Every business owner or CEO has certain indicators they use to get a “read” on how their company is performing.  Based upon what those indicators tell the owner, he will adjust strategy going forward.  Business cash flow, profit and net worth depend on the owner making the correct decisions.  I have found most owners do a good job of reacting and making the necessary adjustments.

Unfortunately, all businesses are impacted by changes in the economy over which there is no control.

Should an owner invest in a new product line, open a new branch or cut back overhead in anticipation of rocky economic headwinds?  Those are tough decisions to make.

There are plenty of economic indicators released by the government such as housing starts, consumer price index, unemployment rates, consumer confidence index, and on and on.

They are all important to consider but, sometimes, there is information overload.  Compounding the confusion is when the government “restates” an economic indicator after it is released.

I have tended to include a few indicators of my own that I layer into my decision-making.  I will be the first to say they are not perfect and I do not look at them only in making a final decision, but these indicators do represent dollars spent that are impacting the economy one way or the other.

Here they are:

  1. Freight volumes for truckload carriers.  About 2/3 of the freight in the US economy moves by trucks.  This can be an indicator of inventory levels, consumer spending, manufacturing activity, and overall condition of the economy.  Lots of trucks on the highways is a good thing!
  2. UPS and FedEx shipments.  If the economy is tanking then  overnight shipments of almost anything will drop.  A month to month upward trend from these 2 companies is an indicator things are improving.
  3. Airline travel.  If overall airline travel is increasing that means business people are travelling to sell and close deals.  Even in the era of video conferencing, there is still no substitute for face to face meetings.
  4. Hotel vacancies.  Similar to air travel, hotels operating near capacity can be an indicator of more business occurring, more families vacationing and a bump up in conventions and conferences being attended. 

In my opinion, these 4 indicators are a reflection of how the economy is doing.  A downward trend for a number of months in each would probably cause me to think twice before charging ahead with expansion plans.

I would be interested to hear if you have your own unusual economic indicators that you follow.

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