My take: Mostly positive news on economic front

June 09, 2017

June 5/12, 2017: Volume 31, Issue 26

By Steven Feldman

 

Screen Shot 2016-07-15 at 3.46.11 PMAs 2017 approaches the end of its first half, this seems as good a time as any to check in with our favorite prognosticator, Alan Beaulieu, principal at ITR Economics and one of this country’s most informed economists, to see where we are and where we are going. For years, industries and associations across the U.S.—including the North American Association of Floor Covering Distributors—have relied on Beaulieu’s spot-on track record for accurate economic intelligence and actionable suggestions to drive profitable business decisions.

While Beaulieu continues to assert that we are on track for a “great depression” in 2030, for the next 12 years, “The world is your oyster,” he optimistically professes.

Some highlights: Industrial production is moving up. Manufacturing production is increasing, with strong durable goods production into 2018. And despite a slowing in nondurable goods, he expects that category will also improve.

Robotics, lean manufacturing, lean engineering, digitalization and the many additional advances in technology and efficiency are all contributing to U.S. manufacturing strength. In fact, on the 2016 Global Competitiveness Index, America ranks No. 2 just behind China; by 2020 we are predicted to be No. 1.

Global leading indicators, defense spending, foreign direct investment and oil prices are all trending up—all very good signs for the health of the economy over the next year.
Construction markets are also healthy, with housing starts expected to be stronger in the second half of 2017. For the record, they are currently at an eight-year high. Non-residential construction is also looking bright, with dollars spent at a record high so far this year. Beaulieu is projecting a 7.7% growth rate for the year.

Also keep in mind that Beaulieu believes this economic growth spurt is not a “Trump bounce.” That’s because the positive signs started before the election, not after. That’s good news for all of us because the growth is foundational—in other words, not subject to politics and sustainable into 2018.

The idea is to think differently about growth. The key is for companies to differentiate themselves so they do not become a commodity. This allows these companies to raise prices to earn more money while the economy is strong. The only way to do that is through creative, smart marketing to build a strong competitive advantage. “It’s amazing to me how many companies treat marketing like a ‘nice to have’ rather than a ‘need to have.’”

We’re still on track for a mild recession in 2019, Beaulieu believes, but if distributors and manufacturers plan for the slowdown and implement management practices to maintain their bottom lines, the slowdown will have little effect. He suggested companies must build capital in 2017 and 2018 to take advantage of investing in 2019. While other businesses are suffering during the recession, smart companies will be in a position to invest and grow market share to take advantage of the comeback in 2020.

Here are some of Beaulieu’s takeaways:

  • Focus on creating a strong niche area of expertise.
  • Invest in marketing your unique value proposition.
  • Make sure your employee training and retention programs are top-notch.
  • Rethink millennial employees and be flexible to attract and retain them.
  • Plan for higher wages.
  • Interest rates are predicted to go up twice in the next year.
  • The U.S. dollar is strengthening, which will slow down exports.
  • Immigration is important to continue our economic growth.
  • Free and fair trade is necessary to grow the economy.

 

 

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