First, a reminder of the SmallBusiness.com “bold prediction” related to the 2014 U.S. economy made on December 31, 2013:
After several years of post-recession tepid growth far below historical patterns, the boys-on-the bus economists are now so shell-shocked, they don’t know how to predict anything higher than a 3 percent growth in GDP, which is yet again their 2014 prediction. You want not-boring? I predict a 4.5% GDP growth for the year. Why? (1) I believe gasoline pump prices will trend downwards, serving as the equivalent to a tax cut for consumers. (2) I believe there is pent up demand for business- and manufacturing-related technology and equipment. (3) I believe there is pent up demand for construction and related industries, causing them to expand faster than anticipated–and create more jobs than predicted. (4) I believe the Fed’s ratcheting down of “quantitative easing” will slow down stock market speculators and day traders, but have little impact on the general economy.
So, here were the predictions of 2014 U.S. economic growth on 12/31/2013:
- SmallBusiness.com: 4.5%
- Economists (Consensus): 3%
And here is the U.S. economy on 9/26/2014
(Reuters) – The U.S. economy grew at its fastest pace in 2-1/2 years in the second quarter with all sectors contributing to the jump in output in a bullish signal for the remainder of the year. The Commerce Department on Friday raised its estimate of growth in gross domestic product to a 4.6 percent annual rate from the 4.2 percent pace reported last month….(…)
Or, another way to put it:
- 12/31/2013 – SmallBusiness.com: 4.5%
- 12/31/2013 – Economists (Consensus): 3%
- 9/26/2014 – Commerce Dept. 4.6%
On the Other Hand
Economists are famous for their ability to end each sentence with the phrase, “but on the other hand.” So, those “consensus economists” really wanted to predict the economy by saying, 3% growth but “on the other hand, it could be more, or it could be less.” Like journalists vs. historians, economists are better at explaining what went on with past events than making predictions about future ones. But most importantly, they benefit from the fact that no one keeps up with generalized predictions about what the GDP will be in 12 months. And, frankly, such predictions are of little use to most small businesses unless they point to a dramatic rise or fall in the overall economy.
The U.S. economy is large and diverse, so it is impossible to predict how the weather will impact negatively one group of small businesses while benefitting another.
Knowing the trends in your specific industry, type of business or geographic location are the types of “micro-economic” data that matter to most small businesses. And the best research can be from having constant conversations with: (1) Customers (2) Vendors, and (3) your friends (the candid ones) who also own or manage small businesses in your area or industry.