By Brenda Cronin
Worries over the upheaval in Crimea are rising, along with fears of an economic slowdown in China. But another drag on optimism—business uncertainty—is heading the other way.
The reason is twofold: Years of gyrating policy in Washington are giving way to comparative calm. And companies are becoming more nimble, using real-time data to maintain a close watch on their operations to adjust quickly to a volatile world.
On the first front, one gauge of the nervousness—the Economic Policy Uncertainty Index—has dropped to levels not seen since the earliest days of the 2007-2009 recession.
In the U.S., the index has tapered off sharply from its all-time high around the time of the debt-ceiling face-off in August 2011.
The gauge surged again in late 2012, just before lawmakers fashioned an 11th-hour deal to avert the package of tax increases and spending cuts known as the fiscal cliff.
Based on economic news and forecasts as well as tax-code changes, the index has etched a range of sharp peaks and valleys since the full onset of the recession, illustrative of a phase when many executives expressed wariness toward investing or hiring amid the political tumult.
But recent budget deals as well as distance from last year’s spending cuts and government shutdown have sharply diminished the fear of more curveballs from Washington, even as wild cards—like the political turmoil in Ukraine—persist.
“Overall, policy uncertainty has dropped down to normal levels, and this is a key factor helping to restart growth in the U.S. and Europe,” said Nicholas Bloom, an economist at Stanford University, and a creator of the uncertainty index.
On the second front, reams of data have supplanted instinct in driving decisions on everything from hiring and supply chains to shipment orders and routing.
Data allows businesses to “sync up supply and demand as never before,” said Paul Ballew, chief data and analytic officer at Dun & Bradstreet. Market research decades ago involved considerable “trial and error,” Mr. Ballew said. “Now there is far more science in it.”
Companies want data—either in-house or secured from outside analytics firms—to enable “better demand estimates, a better ability to target market opportunities and a better ability to segment markets,” he said.
Anheuser-Busch recently conducted a massive data-analysis project to tease out for the first time the sales tactics of its most successful beer sellers among roughly 40,000 U.S. retailers.
The project examined a year’s worth of sales in very localized detail to help the brewer understand how some sellers enlisted displays, promotions and other steps to notch up sales.
“We now use this data to help develop a sales strategy,” said David Almeida, vice president of sales at Anheuser-Busch in St. Louis, the U.S. business of Belgium-based Anheuser-Busch InBev. BUD +0.76% Anheuser-Busch in St. Louis has hired a director of business intelligence and aims to expand the sales-data analysis program this year.
Chicago-based Coyote Logistics LLC, which coordinates thousands of shipments by truck and train across North America daily, relies on a “massive amount of private data that we didn’t have five years ago,” said Chris Pickett, the company’s chief strategy officer.
Coyote, founded in 2006, tracks the drivers in its network as well as what they are hauling, such as fresh produce from the South or trees from the Pacific Northwest.
“With a couple of mouse clicks or key strokes,” Mr. Pickett said, he can now superimpose “weather data or other data sets to look for correlations or causation” in studying the shipments of bottled water and other goods.
More-precise weather forecasts allow Coyote either to route sensitive cargo, such as food, around extreme weather, or to protect it with insulation or temperature-controlled truck trailers.
Coyote also tries to make sure its trucks carry freight on every trip, rather than making return trips empty.
The company’s technicians crunch in-house data, as well as government and industry reports on gross domestic product, fuel prices and truck tonnage indexes, to see where business is headed and to determine where to expand Coyote’s approximately 1,300-person workforce.
“For any business, forecasting…is going to be a key way to cut uncertainty,” said Mr. Bloom, of Stanford. “The best way to do that is just to have a lot of information…on your own performance and competitors’ performances.”
But Mr. Bloom cautioned that the digital deluge isn’t a silver bullet. It can help businesses get a handle on the next quarter or year, he said, but not necessarily three years from now.
“The parameters and models are changing too fast,” he said.
Data and a stable policy environment can mute business uncertainty in the short run, but jolts that few saw coming can still upend the best forecasts.
After all, Mr. Bloom’s own Uncertainty Index notched a long, serene stretch all the way up to the last recession.