by Steve Feldman
I don’t know how many distributors did not make the trip to Colorado Springs, Colo., for the annual NAFCD meeting, but those who sat on the sidelines missed what is annually one of the industry’s most informative 90 minutes: the economic forecast from either Alan or Brian Beaulieu, the twin principals of the Institute for Trends Research (ITR). It’s something I refer back to all year when speaking with high-level industry executives, if for no other reason than these guys are always right.
Anyway, as a public service, your friendly neighborhood editor will now provide the CliffsNotes version for his loyal readers. Here is what you need to know:
First, we are definitely in recovery mode, but it is lethargic. The worst is definitely behind us; it just doesn’t feel good yet. In fact, the rate of recovery is slowing and will continue to do so for the first two or three quarters of 2011. Then the fun begins. The recovery will gain momentum and last through 2013. Most people are underestimating how good 2012 will be. People will look at a so-so 2011 and be cautious for 2012, but they are going to be surprised.
Next, let’s talk about housing. Housing starts are slightly above last year but will drop a bit in 2011. This is interesting because the National Association of Home Builders is forecasting double-digit housing gains in 2011, but ITR does not see that happening until 2012.
One more thing on the subject: Housing was typically a leading economic indicator, but this time it is lagging the economy. That’s why people are afraid of a double dip recession because they are used to housing leading. But housing does not always lead, nor does the consumer. This recovery is being lead by B2B.
Much of the recovery has to do with the relationship between personal savings and inflation. Personal savings is at a highly elevated level. Consumers are saving more than they used to. Some economists believe the consumer has permanently changed because of scars from the downturn of the last four years. Not ITR. The Beaulieu brothers see savings returning to a normal level, but it will take three years removed from the recession for Americans to spend money the way Americans traditionally do.
Inflation will be one reason why savings rates will go down. You would have to be in a coma to put more money into savings with inflation on the horizon. That’s why government likes inflation. It creates an urgency for consumers to spend.
Some other nuggets to digest:
- People’s homes are not declining in value. That means they start spending money on renovation. In fact, there has been a pickup in home additions and renovations in certain parts of the country. People are willing to spend more money. ITR calls this an incredibly positive trend.
- We will have downturns going forward, but we will not see anything like the last few years for at least the next 15 to 20 years. We have survived the worst. 2014 will be a rough spot, but no worse than the early ’90s.
- Nonresidential construction is still in recession.
There’s a whole lot more to this. We’ll talk.