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As business owners and investors plan for the future, it’s critical that they consider external forces that will affect demand. Here are 19 social, technological, economic, ecological and political trends that will impact businesses in 2019 and beyond:
1. Economists Are Predicting A Softening Of The U.S. Economy
Consumer spending: 2.7%
Residential fixed investment: -1.3%
Business fixed investment: 4.2%
Federal spending: 3.8%
A slowing economy means you can expect companies to invest less in heavy equipment and other fixed expenses.
2. Global Growth Is Also Tepid
According to the Conference Board the global economy will grow 3.1% in 2019 and GNP growth will slow in key markets such as Europe (1.9%) and Japan (0.9%). U.S. companies will not only struggle with exports to China but in mature economies around the world.
3. U.S.-China Relations Remain Tenuous
The Trump administration has demonstrated a pattern of making dramatic announcements in order to establish a basis for negotiations (such as with North Korea). Renewed fears about the tariff negotiations were one driver to recent market volatility. The world is watching with wonder to see whether the “trade war truce” is legitimate, or if tariffs represent the long-term trade policy of the U.S.
4. Investors Are Starving For Yield
With uncertainty in the U.S., China, Japan and Europe, there are few safe options for investors. Interest rates are still relatively low, and real estate capitalization rates are undesirable. Goldman Sachs projects the 10-year Treasury rate to reach 3.2 by Q4 of 2019. Businesses sitting on cash will have to settle for modest returns.
5. The Technology Of The Year Will Be 5G
While artificial intelligence and the internet of things (IoT) get all the attention, 5G could be the technology of the year in 2019. 5G, which could improve processing speeds by more than 10 times and could enable remote surgeries and Uber’s announced food delivery drones. In fact, 5G is so important that China, South Korea and the U.S. are embroiled in an arms race to be first to market.
6. Bots Will Revolutionize Customer Service
Research from Gartner, Inc., shows that the use of chatbots in customer service will have increased 10 times between 2017 and 2020, and bots can reduce customer inquiries by up to 70%. This will also lead to an abandonment of mobile apps by large brands.
7. Traditional Social Media Companies Are Struggling
I believe 2019 will mark a down year for social network companies such as Facebook. Companies focused on growing through social media are shifting spending to new platforms.
8. E-Commerce Grows At A Torrid Pace
E-commerce is expected to grow 20%, on pace with its 2017-2018 growth rate. More and more, even traditional brands are considering direct-to-consumer to be a channel they can’t ignore.
9. The Software As A Service (SaaS) Revolution Dominates Small Business
Historically, small and mid-market businesses have had a difficult time finding sector-specific software products. A Cisco study suggests 74% of application workloads will be SaaS-based by 2020. For example, companies who once focused only on CRM (such as Insightly, Zoho and MS Teams), are expanding their offerings to include functionality like project management, email marketing and survey technology.
10. U.S. Manufacturers Will Shift Production To Mexico And Elsewhere
I believe many U.S. manufacturers have grown weary of China’s currency instability, cyberattacks and possible failure to protect intellectual property rights. With the threat of tariffs, many are considering options including India, Thailand and Malaysia. The recent signing of the U.S.-Mexico-Canada Agreement only boosted the prospects of U.S. companies leveraging Mexico’s proximity and low labor cost.
11. Central Banks Keep Interest Rates Low
There is uncertainty about the degree of rate hikes by the Fed, but higher rates are generally expected. The cost of money will certainly be higher in the years ahead. Companies will be focused on reducing inventory and tightening their cash cycle.
12. The Split Houses Of Congress Will Lead To A Legislative Standoff
While Democrats won’t have enough votes to block Trump appointments, they will have the opportunity to block his legislative agenda. There may be common ground on some issues, such as revisions to the Affordable Care Act. Other priorities may include a transportation bill.
13. Europe Is In Shambles
With leaders including Germany’s Merkel and Britain’s May losing favor, combined with Italy’s budget crisis and Brexit, Europe’s political core is unraveling. Britain’s financial system has been a credible hub of commerce, and Brexit is feared to trigger instability.
14. Businesses Will Continue To Feel The Pain Of Full Employment And Higher Labor Costs
With the unemployment rate hovering around 4%, Amazon and others have announced higher wages to keep pace with escalating minimum wage rates. Cities such as Burlington, Iowa City and Boulder have a low unemployment rate, below 3%, and companies are desperate to hire there at any skill level.
15. Real Estate Values Are Suffering In The Wake Of Housing Unaffordability
There are already signs of strain, as real estate investment trusts (REITs) have performed poorly of late. It appears we may be at the end of a real estate cycle, and higher interest rates create a natural ceiling.
16. Natural Gas Enjoys Its Status As The Preferred Fuel
While the administration aims policy at coal, many coal plants will close in the next 24 months as natural gas volume continues to expand. The cost of energy should be more predictable in the days ahead.
17. Oil Prices Will Stabilize
Markets swooned after the U.S. exited the Iran nuclear deal, but oil prices should normalize in 2019. The U.S. Energy Information Administration predicts per-barrel prices in the mid-$70s.
18. U.S. Companies Must Adhere To More Stringent Privacy Laws
Recent comments by Apple CEO Tim Cook are reflective of the sentiment that U.S. companies will need to adhere to privacy regulations that would mirror the EU’s General Data Protection Regulation (GDPR).
19. There Is Heightened Awareness Of Equality As A Business Issue
Over 100 women won congressional seats in the 2018 midterms. Companies are re-evaluating their gender equality policies and seeking out more female independent directors.
It appears as though our economy is in transition, and companies are likely to modify their investments to weather the storm ahead.
December 14, 2018 at 07:21AM
Forbes – Entrepreneurs