To give you a good sense of how a changing economy might impact your
business, you should look at Leading Economic Indicators. These are
periodically published statistics and information about economic
The following are the more important indicators.
Gross Domestic Product, or GDP, measures the total output of the
Canadian Economy. An increasing GDP indicates that the economy is
The Inflation Rate is measured by tracking the price of a "basket" of
goods which includes foods, services and durable goods. Inflation erodes
the purchasing power of a dollar so that more dollars are required to
buy the same basket in a subsequent year.
The Interest Rate, or Bank Rate, is set every Thursday by the Bank of
Canada. Interest rates affect the ability to finance major purchases.
The Unemployment Rate measures the number of people out of work at any
given time. High rates of unemployment affect productivity, purchasing
power, and the cost of social welfare programs.
New Housing Starts are measured because of the spin offs generated.
Houses are major purchases and will generally include new furniture,
appliances, decorative accessories etc. as well as the building
materials. It therefore spurs economic activity in a number of different
Sales of automobiles, furniture, appliances, and other durable goods are
also measured. Complicated goods require assembly of a number of
different components, creating spin off effects in various industries.
Again, increases in these indicators reflect increased economic activity
Plant equipment and tool orders and inventory levels are also important
indicators. These measure the confidence businesses have in being able
to sell their product and recoup their investment in these assets.
International trade statistics, in much detail, measure the flow of
goods and services in and out of our local economy.
The Business Bankruptcy Rate reflects the ability of business to cope
with the economy and their markets.
Of course all these only give you a general senses of the economy and
what might generally be expected to happen in the near term. What
specifically impacts you must be measured by your internal information
system. For example changing sales and order levels, cost and
availability of resources and raw materials, changing customer
demographics and requirements...
The importance of trends to business cannot be overemphasized. Trends
can create and destroy a business or improve or destroy its
profitability. For this reason, those running a business must
continually monitor external factors that impact on their business.
Demographic trends reflect the changing composition, needs and
preferences of a company's market. As with all change affecting a
business, survival and continued well being depends on how well the
change is incorporated into the firm. It may mean capitalizing on a new
opportunity, changing operating methods or marketing focus, or improving
and repositioning your product to respond to changing preferences.
I have compiled a list of the more significant demographic trends that
impact business today. This list is by no means exhaustive and is
largely the result of observation and reading various publications. You
might consider how they affect your business. I have separated those
relating to consumers and those related strictly to business units.
These trends include such phenomena as changing numbers within age
groups (ie the aging baby boomers, declining numbers of teenagers etc),
environmental and health consciousness, increasing number of dual income
families, more sophisticated consumers, increased desire for convenience
etc. Business needs to recognize how these changes will impact on their
business, and respond appropriately.
These trends include decentralization in large organizations, increasing
use of outside contractors, increased importance of staff training and
education, a focus on productivity and competitiveness, increased
communication alternatives, and increase in hardware and software and
other technology alternatives etc.
In order to make this concept of trends truly useful to your business,
consider this list and think about the trends affecting your industry.
You should consider your customers, your suppliers, the state of
technology and any other trends that might affect your revenues or the
way you do business. Contacting your trade association, your chamber of
commerce and others in your network is particularly useful. Once you
identify the trends, you should consider how they will impact on your
particular business and plan to deal with them.
The key is that those that adapt survive. Leading indicators, and other
published economic information can be quite informative. Go to the
Statistics Canada website for immediate needs and and look for published
statistics in the business press. Forewarned is forearmed.
© 2015 John B Voorpostel CPA, CA, CMB