Put up the shutters

Risks to your growth are growing fast. It’s time to take defensive action. COLIN BENJAMIN

By Colin Benjamin

Business owners who still have some liquidity must take heed of the very real storm warnings being posted by consumers around the world. Consumer confidence is plummeting at the same rate as house prices are falling and oil prices are rising.

Now is the time to chase every creditor and shorten terms of trade rather than make further speculative investments. Small business confidence has been falling at a slower rate, propped up by tax cuts and bailouts of banks and financial institutions that will not be repeated in the next six months.

There are a host of risks to growth through early next year: rising prices of goods and services from the flow on of the petrol pump rises, continued dramatic falls in house values and declining new home starts, and a possible slowdown in consumer spending as the impact of tax cuts is offset by higher fuel and energy costs.

While there will be a cut back in the overall rate of economic growth around the world, there will be an increase in disaggregated opportunities for local service suppliers who can support their customer base through to better times in the middle of 2009.

The Conference Board, a New York-based business research group, said consumer confidence dropped to 50.4 in June from 58.1 last month. The scale – which uses as its benchmark a 1985 level of 100 – peaked most recently at 111.9 in July last year.

Around the world, consumers’ expectations of the economy six months ahead are plunging at an increasingly rapid rate. Central banks welcome this trend as a downward pressure on inflation in the US, Europe and countries like Australia, seeing this as a balance against the continued growth of the BRIC economies at rates in excess of 8% a year.

According to John Lonski, chief economist at Moody’s Investors Service, “the final quarter of 2008 could be a big mess. That might be when we finally observe back-to-back quarterly declines” in gross domestic product, which typically signified recession, he said.

Prices of single family homes in 20 major US cities dropped by 15.3% in April from the year before and are now back to 2004 levels, according to the Case-Shiller home price index released by Standard & Poor’s.

As an indication of the rate of collapse in the US leading to a potential landslide win for Obama, the Office of Federal Housing Enterprise Oversight, which tracks prices of homes purchased with their mortgages, said house prices were the lowest level since its tracking began in 1991.

In the Australian context, the debate will be directed towards the RBA holding its nerve on inflationary pressures brought about by the continuing commodities boom as the household and consumer sectors right off their tax benefits against a rapidly rising cost of living.

Now is the time for small and medium business to put up the shutters, reduce inventory, increase sales calls and do anything possible to hold their best quality sales and management teams,.

As indicated in earlier Futurist columns, once Obama is in the big house on Pennsylvania Avenue, we will see a new approach to taxes on speculative investments and the top end of town that will bring the international market back to reality by the middle of next year. By then companies that have built access to the BRIC economies will be able to get almost unlimited credit for real export developments.

Dr Colin Benjamin is Entrepreneurship and Strategic Thinking Consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Contact: CEO Dr Jane Shelton. 

For more Futurist blogs, click here.