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The Economy: Are We Moving Backwards by Standing Still?

The Economy: Are We Moving Backwards by Standing Still?

July 16, 2012
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Uncertainty is giving way to pessimism, according to the results of the National Association for Business Economics' July Industry Survey. Respondents expect flatness in sales and profit margin and indicated lower expectations about real GDP growth.

“The rising sales and profit margins experienced earlier in the year may have been short-lived," says Nayantara Hensel, professor of Industry and Business at National Defense University.

The only positive note from the latest survey is that inflation continues to be low.

In particular, NABE panelists – made up of business economists and others who use economics in the workplace – expressed concerns about the potential expiration of the Bush-era tax cuts and the automatic government spending cuts that could take place in January.

Not all economists agree with this outlook, however. Alan Beaulieu, president of ITR Economics and senior economist for the National Association for Wholesaler-Distributors, says there's reason for optimism.

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In his June NAW Advisor, Beaulieu advises distributors to "invest in your business now because you will be even busier" going into 2013.

He backs this assertion up with three key points:

1. Disposable Personal Income levels for consumers have stabilized, and for most people this won't change even if the tax cuts expire.

2. Business-to-business activity on the global scale are expected to be steady or to expand.

3. The impact of Europe on the U.S. has been overblown. "Europe is not going to pull the U.S. into a recession," Beaulieu says. In fact, ITR is seeing signs that a flat-to-mild recovery may begin on the continent later this year.

So is the NABE pessimism misplaced? Perhaps. But it also highlights the difference in perception versus data. As David Gordon, president of Channel Marketing Group recently told me, our collective inaction because of uncertainty – particularly around the upcoming election and political environment – is what may drag us back down into recession.

Both Gordon and Beaulieu agree that there is plenty of opportunity out there; business executives just need to start acting on it rather than focusing in on what may or may not happen later this year.

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