For Growth, CEOs Must Carefully Manage Price Increases, Labor, Inventory Levels

Chief Outsiders, the nation’s largest and fastest growing firm offering fractional Chief Marketing Officer services with Fortune 500 experience, today hosted a live discussion with ITR Economics to assess business demand in 2023. Leading economic indicators were analyzed to ascertain what CEOs must do to ensure growth and success in the coming year.

“While select sectors like technology and single-unit housing are showing signs of weakness heading into next year, the broader macroeconomy will be categorized by slowing growth throughout 2023,” said Patrick Luce, Economist with ITR Economics. “While the Federal Reserve’s actions do present challenges to the economy, the impacts of fast-rising interest take time to manifest and are more likely to be felt in 2024, potentially pulling ITR’s mid-decade recession outlook forward.”

ITR’s outlook shows that the manufacturing sector has some unevenness, but is generally positive. However, securing blue collar workers will continue to be a struggle. The tightness within that market was apparent before COVID and it’s still tight currently. The expectation is it will continue to be so throughout the decade.

Meanwhile, maintaining white collar positions will depend on whether workers are in technology or not. The tech troubles we are currently seeing with big layoffs from the likes of Meta and others are likely to continue and persist throughout 2023.

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“The main thing CEOs need to take away from the economic data is that the sky is not falling. The economy has generally been sound and it continues to be so. Many, if not most, business sectors are going to have a soft landing throughout the next 12 months,” said Pete Hayes, CMO and principal of Chief Outsiders. “That said, CEOs must be careful about price increases, shoring up their labor – both full and part-time, and closely monitoring inventory levels as supply chain pressure wanes and demand in many sectors softens. There is opportunity to plan depending upon a business’s understanding of where it is in its own cycle, where its industry is, and where the industries that it sells to are.”

Price Increases

First, since caution is warranted concerning any predictions of a recession and continuous inflation, CEOs need to be prudent with price increases. Indeed, there is nothing wrong with a concern for short-term margin protection, but the Purchasing Managers Index (PMI) rate of change has already turned negative which suggests easing demand into 2023 for many sectors. Anticipating the coming disinflation through price setting will make a company a more attractive alternative than more expensive competitors.

Labor

Companies should also pay close attention to the labor situation. There are fewer than 0.5 people available to fill any given job opening. Businesses need to invest in the employees they have (through retention policies and rewards) while at the same time looking for new ways to automate relevant human resource processes. Firms should also be willing to source flexible or part-time help through the gig economy. There are now temp or fractional labor resources in almost every position and level of business, from engineering types to the executive suite.

Inventory Levels

Businesses also need to monitor inventory levels as supply chain pressure wanes and demand in many sectors softens. Buying power has shifted significantly in many sectors in the current post-stimulus environment. It is crucial to avoid getting caught off guard. If possible, businesses should target sectors that are still growing. For example, warehouse construction opportunities are multiplying while office construction numbers decline. If companies can pivot their goods and services to such an adjacent sector, they’ll have a chance to grow.

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