The unfortunate effect of COVID-19 on forecasting and planning was that businesses simply could not plan. The pandemic hit, and everything ground to a halt, leaving companies with economic indicators and historical relationships that no longer mattered in their planning process. There was no reliable data and a lot of uncertainty about what would transpire in 2020.
Now, nearing the end of December, there are practically nine full months of pandemic data. Businesses should be taking that valuable information and using it to understand the post-COVID effects on their performance. Building two sets of economic indicator dashboards would be tremendously helpful in this endeavor.
Pre-COVID Indicators Dashboard
The first dashboard should include pre-COVID indicators, which are the basic run of the mill leading indicators that all companies should have been monitoring well before the pandemic. These indicators include how data, such as household income or the employment rate, impacts a business. Although these might not be as relevant today, as the U.S. moves toward a post-COVID society and back to more normalcy, some of those critical traditional lead-lag relationships and economic impact indicators are going to matter again.
Post-COVID Indicators Dashboard
Nine months of data on economic factors that have drastically increased in importance due to COVID-19 are now available. Picture a center aisle grocery manufacturer for chocolate chips. A pre-COVID dashboard might include indicators related to whether the product is priced appropriately or placed in the right location to capture the steady business of selling chocolate chips. This dashboard might also include some economic factors, such as the employment rate, which could have proven to be leading indicators before.
In a post-COVID society, consumer behaviors such as eating more at home, conducting Google searches for cookie recipes, or spending less on dining out are more significant indicators for chocolate chip sales. People may have searched for recipes at a very stable rate prior to the pandemic and resulting recession, but suddenly this search activity spiked. So, what was once a marginal indicator before the pandemic becomes extremely relevant now. These post-COVID indicators should be housed in a second dashboard alongside pre-COVID indicators to monitor how business is aligning.
COVID Blip vs. Long-Term Trends
As a vaccine becomes available and COVID cases begin to go down, consumers’ choices will broaden. It’s going to be very important to know whether people are baking less at home because they are dining out more or if they are picking up a new baking habit that will be a positive tailwind to your business. By monitoring these behaviors through economic data, companies can understand consumer sentiment trends, consumer habits, and online search behavior.
A great deal of real-time data is available, and companies can track whether there is a sustained trend-shift in behavior or if the pandemic has created new patterns. This goes beyond just the grocery store example.
Home improvement trends are emerging as consumers have been spending more on renovating their homes and backyards. There is a significant demand for pools because people want to vacation in their backyard, which has created a supply issue. Will this change after COVID-19 or is this the beginning of new habits in which people spend more money and time near the home? Economic data allows companies to monitor trends and decipher which are near-term, COVID-related trends and which are likely to be long term.
Timing is Right for New Analysis
The difference between 2020 and 2021 is that now data exists for what a COVID-19 economy looks like versus a non-COVID economy. Yes, the future is uncertain, but models can be built from available data to track and monitor the economic recovery and the COVID-19 impact. No matter which way COVID-19 tracks over the next couple of quarters, relationships have been identified that can be applied to say that sales are likely to do “x” if “y” happens.
In 2021, the planning environment is right for new analysis. Some new data is available, and companies should leverage it to make better plans, even though there is still an elevated level of uncertainty.
Navigate What’s Next with Economic Scenario Planning
The COVID-19 crisis has given rise to a world of economic uncertainty, with uneven effects across regions and industries. As we head into 2021, every business wants to know how the pandemic will impact next year’s numbers.
Prevedere’s Economic Scenario Planning solution helps companies navigate these tumultuous times. The solution projects future business outcomes for three plausible macroeconomic scenarios under COVID-19. Companies can use these insights to sharpen 2021 forecasts and plans, improve shareholder guidance, and stay on top of the pandemic’s evolving impact.