Leading economic indicators: changes in advance of business cycle movements
Consumer confidence
Lagging indicators : changes after business cycle movements
unemployment rate
Using leading indicators to anticipate movements in GDP growth drivers and GDP itself.
Why do we need to consider inflation in the model?
Strategic Marketing (Pricing, Advertisement budget, Messaging)
1) Pricing: cut price in recession and raise price in an expansion
The price elasticity is not immutable but changes over the business cycle movement. The price elasticity will rise when the economic in recession.
The price hikes in recession will reduce revenue rather than increase the revenue.
2) Advertising budget: increase to seize the market further to increase MKT share, and build brand
3) Messaging: sell value in recession and sell style in an expansion
Operations and Supply Chain Management (cut down production and trim inventory in recession)
Capital Investment :
increase Capex to 1) be ready to be first to enter into market when the economy recovery, 2) build factories and facilities with lower cost. 3) replace with modern facilities.
Corporate finance
Debt/Equity Ratio: the relative cost of debt/equity change over business cycle
1) Debt financing (issue new bonds)
2) Equity financing (issue new stocks)
Credit Management
Management Strategy and Strategic acquisition (acquire during recession and divest in an expansion)
1) Don't over pay for acquisition
2) Don't pay for acquisition with high priced debt
Stock for expansion, Bond for recession
Gold: 1) hold values during inflation 2) with industrial application. Gold price will rise during the expansion.
