Perryman: Uncertainty

We’ve recently seen a rapid increase in uncertainty in the US (and, in fact, the global) economy. Policies related to tariffs are a major source of concern, with a large number of announcements, pauses, shifts, and exemptions causing confusion. Consumers as well as companies are trying to figure out what is going to happen and how they should prepare. In a similar vein, the major shifts in agency funding and missions and frequent backtracking are sources of ongoing consternation. This stuff matters!!

The normal human reaction to uncertainty is to do nothing until more clarity can be achieved. However, we have an economy that’s entirely built on people doing something. Consumers buy things; businesses invest in things. Entrepreneurs start new firms, and hiring occurs. All of these things are essential to economic growth. 

Recent surveys of small businesses indicate that they are less optimistic than they were just a couple of months ago. Although still above the levels over the past several years, the drop has been sharp and plans have been adjusted accordingly. Another survey of small business CEOs found that tariffs are the primary cause of declining optimism. 

Consumers are also worried, with The Conference Board’s latest Consumer Confidence Index indicating a significant drop. In fact, consumers’ short-term outlook for conditions fell to the lowest level in 12 years (a period that encompasses the Covid-19 pandemic). With 70% of the economy driven by consumer spending during normal times, this jitteriness is bad news indeed. 

Details of the policies can be analyzed, with back and forth and different conclusions reached by people with varying frameworks and viewpoints. Overall, many initiatives have aspects which are both positive and negative for the economy, with conflicting effects that we (and others) can analyze, discuss, and debate. The instability alone, however, is indisputably harmful.

Recently, there have been too many unknowns, and the mere fact that there is so much uncertainty in and of itself is an economic phenomenon that tends to slow economic activity. Hopefully, the overall strategy on tariffs and other policies will soon be articulated in a manner that allows companies and consumers to make informed decisions and productively move forward. 

The world is facing uncertainty from many quarters. There are ongoing wars and threatened invasions, for example, which could disrupt business activity and supply chains (not to mention the immeasurable and tragic human costs). Going forward, overall economic prospects will improve when uncertainty is reduced and rational policy options are clearly articulated. It’s crucial to never lose sight of the fact that when things are in substantial flux, we tend to do nothing. For economic prosperity to be sustained, however, we need to be doing something. Stay safe!

Editor’s Note: The above guest column was penned by Dr. M. Ray Perryman, president and chief executive officer of The Perryman Group (www.perrymangroup.com). The Perryman Group has served the needs of over 3,000 clients over the past four decades. The above column appears in The Rio Grande Guardian International News Service with the permission of the author. Perryman can be reached by email via: shelia@perrymangroup.com.

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