First Look: In 2019, expect modest turbulence but safe landing

Sam Waltz
Founding Publisher

Better to buckle your seat belts and prepare for a bit of turbulence in the 2019 economy, but don’t fear the crash landing of a recession or other kinds of substantial downturns.

That’s my takeaway from remarks made last Thursday by Luke A. Tilley, PhD, group vice president and chief economist for Wilmington Trust, a division of M&T Bank.

Tilley, a former economist with the Federal Reserve of Philadelphia, focused on the macroeconomics of the US economy, but added that little in the Greater Philadelphia/ Wilmington region gave him cause for concern.

“We believe the US economy will continue to expand in 2019,” Tilley said. “Business people should not be unnerved by the big swings in the market.”

Two major threats in 2019 to the economy that Tilley described were the continuing prospects in the hike
in Federal funds interest rates as well as the impact of increasing tariffs.

“The key concern is whether a recession is coming. We don’t see one. The US economy is in deceleration mode, but we see growth in the GDP in 2019 of 2.5 percent, down from the 3.1 percent growth in the GDP that it appears we saw in 2018. Yes, it’s a slowdown. But it shouldn’t be all that scary.”

In addition, while Tilley and other economists look to the year-end 2017 Trump tax cuts as a contributor to a robust economy in 2018, they anticipate that tariff impacts will offset some of the economic benefit of those on the overall economy in 2019.

Tilley showed about $350 billion in impacts from a variety of tariffs ““ including auto imports, but mostly on Chinese-made imports ““ that will more than offset about $122 billion positive impact of tax cuts combined with increased federal outlays.

“The economy still will be on a strong footing, and consumers are in a strong place,” he concluded.

All of which brings me to three big ideas for business owners.

First, “plan your work and work your plan.” Take 30 days to focus on building a strong 2019 business
plan that you can use to guide your team.

Second, keep your banker close and in the loop. Bankers hate surprises, and the support of a banker is critical to expanding a business that may have the occasional need, or a long-term need, for capital, or even liquidity in a growing business. Call your banker, offer to take her or him to breakfast or lunch. The banker
will take you instead, and it will be worth the time, like an annual checkup by your MD.

Third, as my Boomer generation approaches its “curtain call,” whatever your age, be proactive in your exit planning, with attention to fine-tuning the business for valuation, as well as sale. If it’s a transition in
the family, it becomes even more important to plan.

Have a great 2019.