Are we in for a tough recessionary 2007 or not?

That issue is sharply dividing economists; because no one is sure what impact the current slowdown in housing will have on the overall market and the broad economy. The difference of opinion of many economists is leading to some uncertainty heading into the New Year. Some economists are predicting a recession and others forecasting continued growth. That reminds me of the statement former President Roosevelt once made.

He said: “I’d prefer dealing with a one-armed economist so they can’t say - “On the other hand!”

Some noted economists that are rather pessimistic predict that spillover from the housing slowdown will be great in 2007. Other optimistic economists state that the declining housing market will be minimal as consumers see their paychecks rise.

The Wall Street Journal reported that 2006 ended without a recession and this followed predictions for recessions in 2003, 2004 and 2005 that never materialized.

So, how do we prepare for 2007? Will it be a bang or a bust? Will we continue to ride a high tide in our industry? According to our President and several experts, the economy is on the rise. Growth is accelerating. The labor market is still tight with unemployment averaging 4.5% and when it gets that low, most of the people that don’t have a job just don’t want to work. (Excluding those in transition.)

There's no doubt the housing market has softened and in some areas it has really tanked. Sales of previously owned homes are estimated to be down 8.6% this year from 2005, while sales of new homes are down 17.7%, according to the National Association of Realtors. Prices, meanwhile, have fallen after posting double-digit gains for years. However, some industry experts believe that although 2007 will not be a banner, it will not be a recessionary year either.

According to Barbara Hagenbaugh of USA Today, the housing market influences consumers in a number of ways, including acting as a job engine in construction, real estate and other industries. It also acts as a catalyst for consumer spending, which accounts for 70% of U.S. economic activity. Economists differ on the extent of the spending impact.

In reality, the downturn in the housing market isn't a nationwide phenomenon, instead it affects only certain pockets of the economic geography. That also means that other opportunities for growth may exist in those markets where the downturn lags long into 2007. If the majority of the experts are correct, the overall economy will remain strong and consumer spending will not take a nosedive. Each of you can plan for the implication of that phenomenon in your individual markets. People will still be buying.

Personally, I believe the housing slump has stabilized in most parts of the country and most of us got through that slump fairly unscathed. That means that 2007 can and should be a good year. It may not be as easy to generate the growth and profitability of the past banner years but if you have a well run disciplined company that has built a strategic plan for the future, then 2007 may present you with opportunity to gain market share from those competitors who haven’t planned as successfully.

Remember, profit covers many sins. When times get a little tougher some of those sins begin to rise to the top. That is when effective leadership really shows its value. Are you prepared for 2007? Are you in a position to take advantage of the opportunities that may present themselves? Ask yourself the following questions to determine your next steps in preparing for the New Year.

  • Can you challenge mental maps that shape perception?
  • Can you put aside relevant past successes and failures?
  • Can you challenge your own assumptions?
  • Do all your sales employees know and understand your business strategy?
  • What are the individual roles in a planning process?
  • How do you develop an annual operating plan?
  • How do we increase our chances of implementing our strategic plan?
  • How does the role of your field sales representatives fit into that business strategy?
  • What meaningful statistics are you using to measure your sales team? Your customers?
  • Do you understand brainstorming?
  • Have you ever participated in a formal “what if” analysis?
  • How do you rate your sales representatives?
  • What type of performance statistics are you maintaining?
  • Are you losing or gaining compared to competitors?
  • Is management involved with the sales to top/target customers?
  • Is management involved in partnering relationships?
  • What’s new in the external environment on which you can capitalize?
  • What new products and services can you offer to provide new growth opportunities? To existing customers? To new customers?
  • What opportunities do you provide to allow you to get to know your clients better at all levels of their organization?
  • Have you held a conference, forum or social event involving several non-competing customers?
  • Do you know your customers’ top 10 customers?

Be An Optimist And Make It Happen

Remember the following facts reported by Barbara Hagenbaugh ofUSA Today.

  • Exports. A decline in the value of the dollar, combined with steady growth in economies around the globe, is expected to boost U.S. exports. Wachovia economists predict net exports will support U.S. GDP for the first time in 12 years.


  • Profits. Corporate profits rose more than 30% in the third quarter from a year ago, according to the Commerce Department. Strong corporate profits allow businesses to invest and hire, helping to strengthen the economy.

    Companies and investors are showing a "degree of enthusiasm and optimism" that corresponds with continued profit growth, says Bob Davis, managing general partner at Highland Capital Partners, a venture capital firm, and former CEO of Terra Lycos.


  • Interest rates. Although the Federal Reserve raised interest rates 17 times from June 2004 to June 2006, rates are still at a historically low level. Plus, a number of economists, including those at Merrill Lynch, Goldman Sachs and Global Insight, predict that Fed Chairman Ben Bernanke and his colleagues will cut rates at least once in 2007, making borrowing, and spending, easier. These positives tell me there will be no recession in 2007. The economy should be good, it’s resilient and if you have planned well with a solid management team you can take advantage of those competitors that may have been making money in spite of themselves.

    So, go create more competitive advantage and gain market share. 2007 will be a good year.