Market Indicators that Affect Our Business

While the general media is forecasting doom and gloom, I would like to offer my predictions for the remainder of 2007 and into 2008 for our section of the economic world. The big economy news is the housing slump and the GM/UAW strike - both are dramatic and are sure to affect even the smallest shop in the smallest town. Or will they?

July numbers show that home prices had their steepest drop since 1991. Before you get overly excited - it was only a 4.5% drop! That means a house that may have sold for $125,000 last year would sell for $119,375 this year. That's a healthy drop, and I have to admit, I'm glad I'm not selling my house this year. But the numbers don't matter until you go to sell your house. And, is it time to slit the wrists? I don't think so.

Now, consider the UAW strikers at General Motors. The strike will cost General Motors 12,000 cars or $270M each day. In the first month, GM could lose $8.1 billion, in the second month $7.2 billion (I don't know why October is expected to be more expensive than November, I just report the news, I don't make it.)
What will it cost the workers? It was reported by ABC this morning that the average Union worker makes approximately $65k each year, and the average non-union worker maker $45k each year. But during the strike, these UAW members will make $200/week. Personally, I can't see the strike lasting that long. We've all got bills to pay, and $200 would barely cover my grocery bill to feed two teenage boys and a working husband! Do you know how long it will take them to make up their lost income? A lengthy strike does not make sense for anyone in 2007. If it does last more than a month, we will all begin to feel the effects. It has been estimated that for every GM worker, there are 10 people working for a GM Supplier. If GM business dries up, so does the business for the supplier. And this is where the strike could begin to affect our business.

But these are the short-term indicators. Do they affect the economy? Of course, but I would say they are more short-term blips than long-term tools to use when forecasting your own business cycles.

That being said, later this week I'll review how some of the more historical market indicators are faring and what they might mean for your business in the near future.