Those tried and true methods traditionally used to gauge economic trends may not be so, well, true anymore. That observation comes from Fred Smith, chairman, president and CEO of FedEx Corp. Responding to a question about the current economy posed during Bear, Stearns' 2005 Global Transportation Conference in May, Smith said he believed economists often overlook how technology has changed business.
"I think one of the biggest things that the macro-economists miss is the fantastically improved visibility of the supply chain for almost all companies today," Smith said. Instant access to accurate, highly detailed information on materials anywhere in the pipeline, he explained, has enabled companies to react immediately to fluctuations in demand by cutting inventories and making other corrections. As a result, Smith said, "what you actually have happening are little micro recessions and short-term adjustments."
Economists, however, continue to extrapolate those fluctuations in one or two indicators into broader trends. That may have worked perfectly well several years ago, when it took adjustments months to ripple back through the supply chain, Smith said. But now that businesses can instantly correct, leaving the overall economy unaffected, those older forecasting methods may no longer apply.