Economic Forecast: The View from the Front

A view of the 1995 economic landscape from various CEOs, senior managers, and other pundits.

Looking to get a fix on where the '95 economy is headed? Well, you can listen to the pundits -- or you can figure it out the way smart company builders do

Calling economics an exact science is like calling Bill Clinton a soul mate of Newt Gingrich's. It's never going to happen. But that doesn't keep a lot of people from thinking they know precisely what the economy is going to do.

In an era when it's the economy, stupid, no one wants to look the part. These days we all have opinions on everything from M3 to G-7. Consider the recent experience of Bill Kelley, chairman of Consolidated Stores. Consolidated, based in Columbus, Ohio, is the country's largest retailer of closeout merchandise. Its stores do particularly well in areas where people on fixed incomes live, which hardly makes its aisles gathering grounds for Ph.D. economists. And yet "the other day I had a guy stop me in one of our stores and ask me where I thought the long bond was headed," Kelley recalls. But it hasn't always been that way. "Back in the late 1970s, when interest rates hit the front page, the average Joe didn't know the prime rate from a loaf of bread."

In a time when people claim to know more about the economy -- and are less sure about where it's taking us -- we at Inc. are happy to toss our share of rhetorical cordwood onto the fire. As we set out to find where the economy is headed this year, our idea was to talk to more than just the usual suspects -- those pundits whose pithy utterings on the macroeconomic view of things get lapped up daily by the mainstream media. We wanted to go deeper. We spoke, as well, to the doers, the growth-company managers who are out tangling with the economy daily. We wanted to find out not just what they foresaw for 1995 but what they were planning to do about it. Of course, for most company builders, planning doesn't mean changing strategy on January 1 or when the latest economic indicators come in the door. The process occurs on a continuum. It's a long-running movie, not a slide show.

Our sample is hardly scientific. Yet it's an effort to get at the increasingly schizophrenic nature of economic analysis. Economic data get mulled over and massaged more and more by the experts these days. But the view from the shop floor is invariably more nuanced -- and certainly as telling -- as deciphering the machinations of a $6-trillion economy through yet another string of data. So in the interest of equal time, we bring you opinions of what's going to happen in 1995 from not just the pundits but the planners as well.

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The Planners
World Beater
These days Cecil Ursprung is a committed globalist. He notes that U.S. gross domestic product stood at 40% of world GDP after World War II. By the century's end it could be 20%. He says he has never known a time when more of the world has been receptive to democratic capitalism. He sees the convergence of these major trends: a more favorable political environment, enhanced logistics and communication, and the withering away of trade barriers. Acting on his observations, Ursprung takes four or five trips a year outside the United States and subscribes to a number of foreign publications -- just to keep a global context in his head.

His company, Reflexite Corp., a $45-million maker of reflective signs, already gets nearly half its sales from overseas. The growth of overseas sales will accelerate this year as a stretch of focusing on domestic business ends. Says Ursprung: "In the United States we see signs that the current business cycle is maturing. We see very definite signs of inflationary cost pressures for the first time in four years, and we see some evidence of a slowing of the recovery that began in 1990."

Since then Ursprung has worked hard to improve operations. "We continue to look internally for better margins. The company shifted to work centers and self-directed teams. That produced productivity gains of 30% in each of the first two years. But it becomes harder to achieve such gains if you stay on the same curve."

Now it's time for Reflexite to change curves, to do less cost cutting in the United States and more boosting of volume overseas, where Ursprung sees business growing 30% this year, versus 20% in the United States. "We finally see signs of economic recovery in Europe. We believe the Far East is bottoming out." Pushing hard abroad, Reflexite has been doing joint ventures and setting up wholly owned companies in Europe and Asia. The latest venues include Japan, China, and Australia.

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Battening Down the Hatches
Smart planner that he is, John Birk collects enough data every week to choke a mainframe. And what he will do this year -- grow his company by 40% -- was inspired by what he discerned from that data in late 1993.

His $11-million company, Wright Express, based in South Portland, Maine, processes records of purchases of fuel, oil, and maintenance services made at more than 80,000 locations nationwide for vehicle fleets. All those data get fed into a finely tuned planning model, lending Birk an unusual edge: reliable leading indicators of the U.S. economy's strength.