National data, local indicators and informal measures of the economy all play a role.
Federal Reserve Chair Jay Powell and his colleagues like to talk about their “data-dependent approach.” In other words, their decisions about whether to raise interest rates or hold them steady depend on the economic indicators they keep their eyes on, such as the monthly national jobs report and the personal consumption expenditures index, along with narrower data, including the number of building permits issued or how much credit consumers are drawing on.
Those kind of economic indicators aren’t useful only for the Fed. Business owners regularly monitor all types of data — ranging from local and informal economic indicators to national ones — to help them make decisions.
For instance, Spiro Pappadopoulos, CEO of the Boston-based Schlow Restaurant Group, keeps track of farm reports and produce prices. But he also watches the Consumer Confidence Index from The Conference Board, along with people’s disposable personal income, compiled by the Bureau of Economic Analysis.
“One is how do you feel about how things are going?” Pappadopoulos said. “Disposable personal income is an actual figure.”
Consumer confidence has fallen over the last couple of years. Pappadopoulos said that means people might cut back on restaurant spending.
“It’s really hard to cut your electric bill in half,” Pappadopoulos said. “You could cut your dining-out bill in half very easily.”
Pappadopoulos said people want to dine out as long as they have the means to do so. So he said restaurants like his can respond to falling confidence by changing up their menus to focus less on extravagant items, like truffles, caviar and uni, and more on comfort food.
“You might lean on, like, if it was an Italian restaurant, a new fresh pasta program, where you’re making all these new shapes of pasta in house with sauce, etc.,” Pappadopoulos said.
Other small-business owners are less interested in general indicators than they are in industry-specific ones.
Cathrine Reynolds, who handles imports at Palmetto Tile Distributors in South Carolina, watches container ship traffic at the Port of Charleston.
“It’s kind of a live photo of the different containers in port, and they’ll have which ones are waiting, which ones are in queue, which ones are out to sea a little bit, but anchored,” Reynolds said.
Reynolds said that lets her give her staff and customers a heads-up if tile shipments are going to be delayed.
“I know if I see 35 ships anchored out, it’s going to be a while,” Reynolds said.
Reynolds said she also monitors informal indicators such as foot traffic in her showroom and even how full local parking lots are. She talks to friends in the real estate industry about whether homeowners are renovating.
“[I’m] trying to observe all of that as I’m going throughout town and watching things, just in our area because this is the market I’m concerned about,” Reynolds said.
In New York, local indicators say the local economy is looking pretty good, said Ken Giddon, who owns Rothmans, a men’s clothing store.
“I see what I see,” Giddon said. “And clearly there are more people in the office. People are on the streets, trains are crowded.”
That has Giddon feeling pretty confident about his clothing sales.
“We literally just re-upped on our lease in New York, a long-term deal,” Giddon said. “So we’re big believers in the long-term security of New York.”
But in other parts of the country, local indicators aren’t looking so good.
“I think we’ve just seen people pulling back a little bit,” said Jenny Niezgoda, who owns Al Fresko, a food business near San Diego that operates a cafe and specialty market and organizes private chef experiences and luxury beach picnics.
Niezgoda said the best indicator of that pullback is her own bottom line. So far this year, her income is down, while costs are still rising.
“Our numbers are definitely showing us that we need to make changes, we need to be smart about our next decision, because we want to be able to survive the next six months,” Niezgoda said.
As a result, Niezgoda said she decided to wind down her market. Instead, she’ll focus more on those chef experiences and beach picnics. The goal is to spend less on fixed costs — rent, utilities and food.
“[If] someone books an event, we’re able to purchase the exact product that we need for that, versus, you know, buying product for the week and having waste or perishable costs that we’re basically eating,” Niezgoda said.
And that, she said, will give her a lot more control over her bottom line.
