My take: Eight thoughts from one of the country’s top economists

September 12/19, 2016: Volume 31, Number 7

By Steven Feldman

It has been awhile since we talked about the economy in this space. Whenever we do, I tend to lean on the forecasts of our favorite economist—Alan Beaulieu, president of ITR Economics and a frequent speaker at the North American Association of Floor Covering Distributors events. Listen to 10 economists and you may get 10 different opinions, but Beaulieu is spot on more than 90% of the time. In fact, you can bet every one of your shekels and pesos that his presentation by far will be the most well attended presentation at the upcoming NAFCD conference in Chicago on Nov. 3.

Anyway, while most economists are offering a somewhat mixed message this season, Beaulieu is taking a more positive, long-range view for future growth than most.

Here are some of his thoughts as we approach the Presidential election:

1. 2017 will be a stronger year for businesses than 2016.
2. 2016 has turned out to be a worse year for the industrial sector than economists predicted with mining being a particular drag on growth.
3. This year’s Presidential election will not affect the forecast. “Whether it’s a Democrat or Republican isn’t going to change the outlook for 2017 because it really doesn’t matter. It takes a while for anybody who’s elected to have an impact.”
4. From World War II on, ITR Economics has studied where the economy does better—under Democrats or Republicans. “It’s statistically insignificant. We’re just as apt to have recovery under a Democrat or Republican. We’re just as apt to have a recession under one or the other.”
5. Interestingly, 53% of Americans think China is the largest economy on the planet, which shows the lack of intelligence on the part of so many in this country. The U.S. remains the largest economy with 24.5% of the world GPD compared to China’s 15%. (Japan and Germany come in next at 5.6% and 4.6%, respectively.)
What’s more, the United States’ share of the pie has increased over the past year. “We are alive and vibrant and doing well. We’re not old and dying.”
6. Oil and gas has been a challenging sector, and the U.S. has really curtailed production. Some of that has been painful, but some has been good, too. “For right now, the good thing is we—and other nations—are cutting back on production, mostly non-OPEC. As we’re cutting back on production, that’s taking care of the glut that’s out there in the world. As we’re beginning to take care of the glut, these prices are going to be seeing some more upside pressure.”
7. This eventual upward pressure, combined with the increased reliance on renewables, will mean that eventually all other costs will go up, leading to inflation. Beaulieu expects some mild inflationary pressures in 2017.
8. Overall, the U.S. is in good shape and poised for growth for the next 14 years. He believes we will have our minor recessions, but nothing really bad will happen until a predicted major depression in 2030, which is tied to global demographic trends and a massive amount of people expected to retire. “In between, you need to be aggressive. You need to hire, you need to train, you need to optimize, you need to make sure your marketing is in place and ensure your competitive advantages are in place. If you do all those things and plan for higher profits, you’re going to find yourself ahead of those who are still waiting.”

We will cover more of Beaulieu’s thoughts in the FCNews issue that publishes after the NAFCD convention.