My Take: Economy to continue growth through 2013

Home Editorials My Take: Economy to continue growth through 2013

September 2/9 2013; Volume 27/number 10

By Steven Feldman

Regular readers of this column know I’m a big fan of the Beaulieu brothers, Alan and Brian, principals of ITR Economics and regular presenters at the annual convention of the North American Association of Floor Covering Distributors. I used to tell people these men—who happen to be identical twins—seem to be correct about their economic forecasts approximately 95% of the time. Then I visited their website only to find they boast a 94.7% accuracy rate.

Anyway, from time to time I like to check their crystal ball to get a gauge on the short-term future. In the most recent monthly forecast from Alan Beaulieu, he noted several positive economic factors that are pushing wholesale distributor sales, something that bodes well for this industry. Among these indicators are the fact that, although minimally, the economy continues to produce jobs. Beaulieu also noted the construction market is improving due to more housing starts and higher prices within the industry. Retail sales are also at all-time highs through the middle of the year.

Given these indicators, Beaulieu believes the economy will continue to grow throughout the rest of 2013, but we may experience a mild downturn in 2014. He pointed to the tensions in the Middle East—most notably the unrest in Syria and Egypt—as signals of concern for wholesale distributors as the continued conflicts will ultimately lead to higher crude oil prices and delivery costs for distributors. On the other hand, due to the increased drilling taking place throughout the U.S., natural gas prices are expected to remain relatively unchanged in the near future. These lower costs will ensure utility prices remain consistent with those of the prior year. For those firms with excess capital looking to make fleet improvements, Beaulieu notes they could consider transitioning their fleets to vehicles powered by natural gas.

Another reason why Beaulieu is predicting a mild downturn is the uncertainty surrounding the new healthcare laws with the retail industry feeling the pressure first. But he expects the dip in the economy to be mild due to the liquidity of assets and low interest rates. The lower interest rates, however, may not be with us for the long haul as the Federal Reserve ponders how much longer the quantitative easing will last.

More positive is his prediction of stronger economic growth from 2015 to 2019. And we could all use some of that.

Next month, FCNews will run what I believe will be a very interesting feature. We are calling it “Planetary Products.” Here’s the gist: Once upon a time, before the word “downloading” creeped into our vernacular, music retailer Tower Records published its own magazine that included a monthly feature called “Desert Island Discs.” The concept was to ask a bunch of famous people this question: “If you were going to be stranded on a desert island for an extended period of time, what 10 CDs would you must have with you?”

Well, we are resurrecting this feature for flooring. Imagine you are beamed up to a planet inhabited by a population resembling humans who have nothing covering their floors and you find yourself owning a floor covering store; what five products would you need to start your business? In other words, what are the five products you feel provide solutions, sell well and with which you can turn a nice profit?

If you could send me the names of those five products and their manufacturers, with one sentence as to why each one would be part of your five, it would be helpful. Try to include one or two from smaller manufacturers if possible. I think we will all find the results interesting.

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