1990 ECONOMIC OUTLOOK SURVEY
WHAT LIES AHEAD?
44% expect either a national or regional recession or both within the next two years
42% of those who expect either a national or regional recession or both expect a downturn in their business
37% expect a national recession will occur within the next two years
36% think their region will experience a recession within the next two years
29% expect both a national and regional recession
27% anticipate a downturn in their own business
HOW DO YOU TELL IF A RECESSION IS COMING?
Top 10 indicators used by respondents
1. Interest rates 22%
2. Unemployment rates 14
3. Stock market 10
4. Financial press 9
5. Sales 9
6. Construction starts 8
7. Newspapers and magazines* 8
8. Clients and customers 7
9. Real estate market 7
10. Auto sales 6
*general interest
WHO EXPECTS A NATIONAL RECESSION?
By region: By industry:
Northeast 48% Service 41%
Far West 38 Distribution 38
Midwest 34 Retail 38
Southwest 33 Construction 34
Southeast 31 Manufacturing 30
WHAT SIGNS ALERT YOU TO CHANGES IN THE ECONOMY?
Top 10 actions taken by those anticipating a downturn
1. Explored new markets 72%
2. Reduced company's expenditures 69
3. Speeded up collections 69
4. Reduced debt/boosted cash 56
5. Postponed hiring 53
6. Diversified product or service line 52
7. Postponed capital expenditures 50
8. Reduced inventory 49
9. Laid off employees 43
10. Changes sales price or fees 40
I LOVE A RECESSION!
Jack Hasbrouck launched The Groundskeeper in Tucson in 1976 and, under the name Environmental Earthscapes Inc., made the Inc. 500 in 1983. But it wasn't until the Arizona economy hit the skids that the $7.9-million landscaping, maintenance, and construction firm started doing more municipal landscaping. With local jurisdictions turning to private companies for services, Environmental Earthscapes's 300 employees are constructing and maintaining public picnic areas, baseball and soccer fields, and parks, as well as landscaping a tremendous freeway expansion in Phoenix. "We're increasing our sales by 30% or more right in the midst of this recession," Hasbrouck says.
In Portland, Ore., meanwhile, down looks like up to Beau Bradley. He thinks Sonitrol Pacific, his $2.5-million company, stands to profit handsomely from the slowdown he sees ahead for the Pacific Northwest. Sonitrol installs and monitors state-of-the-art alarm systems, mostly for businesses. "Some of our best growth came in the early '80s," Bradley says. Recession will bring a corresponding rise in crime, he notes -- particularly burglaries. "We're projecting 30% growth."
Thrifty Auto Supply Inc., another Portland company, also hopes to thrive on adversity. "The after-market auto-parts business has been called recession-proof," says president Steven J. Hopkins, whose five stores make Thrifty the biggest independent auto-parts chain in the city. "When people can't afford new cars, they fix up their old ones. The average age of a car on the road today is more than seven years. So people are already replacing bigger-ticket items -- engines, front ends."
Larry Daniel also looks on recessions with a hopeful eye. The Daniel Company of Springfield, in Springfield, Mo., has a fleet of 35 tractor-trailers that operate as common carriers or on contract. "During a recession, more freight moves by truck than by rail, because businesses wait until the last minute to buy something, and then they want it immediately," he says. "People shorten their inventories and don't buy anything until they need it." A recession and higher unemployment will also ease Daniel's recruiting problems. "We now have about 52 drivers," he says, "and we need about 85."
Investment counselor Eugene Caldwell is equally optimistic. A principal at Atlanta's Caldwell & Orkin Inc., he predicts at least one negative quarter for both the national and regional economy. "I have 42 years of experience in this field," he says. "I have been through every postwar recession. And by and large, in recessions people turn to investment advisers. So we are likely to gain clients rather than lose them.'
WHAT THE EXPERTS SAY . . .
T. J. RODGERS
Founder and CEO
Cypress Semiconductor Corp., San Jose,Calif.
National recession: Perhaps
Regional recession: Irrelevant to business because serve international/national markets
Indicators: Book-to-bill ratio; sales forecasts; customer inventory
Strategic response: Added only 44 employees to a base of 1,350 last quarter; held capital expenditures to $4 million on a base of $160 million
Comments: "The way we run the company and think about planning presumes we are always in a state of siege. We're always prepared for the worst."
JERRY SIGAL
Chairman
SIGAL Construction Corp., Washington, D.C. #1 Inc. 500 (1983)
National recession: Absolutely
Regional recession: No
Indicators: S&L crisis; vacancy rates; lack of architectural business, new building design
Strategic response: Holding general and administrative overhead flat for the past three years; eliminated all debt
Comments: "I used to be a high flier, but I've become conservative. When you don't have anything you can afford to be a high flier, but when you have something to protect, you can't."
BEN COHEN
Cofounder
Ben & Jerry's Homemade Inc., Waterbury, Vt.
National recession: Yes
Regional recession: "I haven't noticed."
Indicators: Overinvestment of money and talent in the military
Strategic response: Lower waste; improve worker productivity; investment in energy efficiency
Comments: "When you can't afford to buy a new house, a new car, or a new TV, you're still going to shell out two bucks for superpremium ice cream."
DENNIS HAYES
CEO and founder
Hayes Microcomputer Products Inc., Norcross, Ga.
National recession: No
Regional recession: "Some parts of the Southeast are pretty bad off and have been for awhile. The economy here in Georgia seems to be pretty stabilized."
Indicators: Prime interest rate; inventory turns within industry; performance of computer and telecommunications sector
Strategic response: Expandedin faster-growing Asian and European markets; emphasized quality
Comments: "At a time when heavy industry has reduced capital budgets, we find they're still buying our equipment because it helps reduce costs."
