Recently I met with my friend and board member, Dennis Blyly. While he is quick to point out he is not a macro-economic expert, Dennis is a very smart guy with his fingers on the pulse of a lot of businesses. Dennis brings a really useful 50,000 foot view of the economy.
We were discussing the current spate of bad economic news and told me he thinks we are at or near the bottom of the sharp downward trajectory. This isn’t to say that things are about to turn up soon, but at least in the manufacturing sector, it won’t get much worse.
When I asked if he could point to data, he said: “Its mostly anecdotal. I’ve been talking with CFOs in mid to large-sized manufacturing companies. They’re telling me that their shipments have been lagging retail demand for several months. Anxiety about banking relationships has made everyone in the supply chain very focused on managing for cash, and that means reducing inventory to a bare minimum. That would suggest that production (at least for consumer goods) could improve without much help from consumer demand in several industries as this process winds down.”
I was both surprised and not surprised by his comments. One the one hand, it seems like bad economic news is drowning out good news at a ratio of 1000:1. Today’s unemployment numbers say my county has the highest rate in the state at 18.3%. My town is actually at 18.9%. Darn near one in five.
On the other, I’m talking to customers and prospects who see this as a time to invest to improve efficiencies, quality and productivity. They are watching cash, but making prudent investments where they can. Some business will not survive this recession. Those who do will be better, more productive companies. They’ll have to be to pick up the slack left by the ones who didn’t make it.