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Upcoming Business Cycle Peak

January 7, 2022

ITR Economics has been forecasting an upcoming economic peak - but what's on the other side of that peak, and what does it mean for the economy? Catch our newest TrendsTalk episode with ITR Economist and Speaker Lauren Saidel-Baker to learn more.



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The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.

Hi, I'm Lauren Saidel-Baker. Thank you for joining me for this episode of ITR Economics TrendsTalk, and happy new year. As I'm recording this in early January of 2022, we at ITR are looking forward to an upcoming business cycle peak in the US industrial economy. So, what that means is that we fully expect, within this quarter, that the 12/12 rate of change for our US Industrial Production Index will reach a high, it will reach a peak. And that the rest 2022 and well into 2023 will be characterized by a slowing growth trend. So, that means continued expansion, but at a much slower, but still positive rate of change.

But we've been talking about that upcoming peak for quite a while now. That thesis is still very much intact. Our outlook still stands. So, I want to expand our discussion today, to look a little bit further ahead. For those of you that are subscribers to our trends report, I would encourage you, log onto the website, open up your app, because you now have access to our expanded outlook through year end 2024. And I want to focus on that year today, because it's going to look a little bit different than 2022 and 2023 will.

Tides don't move in the same direction forever. They shift, they change, the pendulum swings one way and it swings back the other. So, it's important to know that the trends we will experience this year and next will not just straight line project into the future, but they will again, pivot. What that means for you today, is that you shouldn't take these new trends as an ongoing normal. It's important to look past them to the next phase of the cycle. I'm sure everyone on this call today has done their projections for 2022, done your planning now that we are into the new year.

So, what you can do now is look ahead a little bit further, check that intermediate, that medium to even longer term outlook. We still have a great growth outlook for the vast majority of the 2020s, and 2024 is really when things pick back up. If 2022 and three will be characterized by slowing growth, by normalizing rates of change after this robust recovery of 2021, well, 2024 is when we turn that corner again. We start to rise that. Next accelerating growth trend is just on the other side.

So, one of the critical conversations you have to have is, how do you prepare for that? How do you not get lulled into that sense that 2022 and three could just be a straight line projection into the future? So many of the conversations that I have had with clients lately have been about delaying, waiting until all of this uncertainty is behind us, until we have a firmer grasp on economic realities in order to make those good business decisions.

I'm here today to tell you that, that won't work. We can't rely on certainty on proven trends, because they'll have to be backward looking. It's important to use your leading indicators, to use that strong rate of change methodology that we ascribe to ITR, to see what comes next. Look ahead, not just backward, because if you are only looking backward, well, you will want to wait. Maybe you'll want to wait to hire more people until you know that you will absolutely need them. By then, it's probably going to be too late.

Maybe it's machinery capacity. Maybe you want to see that those demand trends really will rebound into the next accelerating growth trend in 2024. Well, how hard is it to be installing machinery, training people on the use of that machinery, just at the time that your demand is, again, accelerating. Use this lull in 2022 and 2023 to position yourself for that next rising trend. Now, in some markets, there will be threats. Our inflation outlook, which is again, posted on our trends report website, shows a bit of a pickup again in 2024. If we expect disinflation to come this year and next, that's when things will again, accelerate.

It's important to keep that in mind with your pricing. Again, I've had these same conversations with clients. We just want to wait out and see the certainty. Maybe we'll wait out this bout of inflation and not increase our prices for fear of alienating our customers. Well, if inflation is on the rise, all you're doing is getting further and further behind. So, again, I would encourage you, use the leading indicators, don't be caught on the back foot. Get ahead of these trends, because that will serve you well, not just this year and next, but for many years to come. Thank you so much for joining me today. I'm Lauren Saidel-Baker, for this episode of ITR Economics TrendsTalk. Let's talk more soon.


Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.