August means it’s time for the National Fluid Power Association’s annual Industry & Economic Outlook Conference. I enjoy the opportunity to listen to the variety of economists discuss what will be happening, both in the U.S. and abroad, over the coming years.
The news for manufacturers is reasonably good right now. In fact, Alan Beaulieu, President of ITR Economics, told the audience, “This is one of the rare times where you know you have a good three or four years of economic expansion ahead of you, before a mild downturn in 2019.” Beaulieu encouraged manufacturers and business owners to invest in their businesses now, and take advantage of the coming years, which should see comfortable profits.
Leading indicators are still pointing up, showing that there is still life left in the U.S. and global recovery. The world is relatively calm, banks are lending, and employment is rising (now that many companies are right-sized). And Beaulieu notes that non-residential construction is improving and deficit spending continues, with no apparent appetite for austerity.
John Walker, Chairman of Oxford Economics, gave a similarly rosy picture, explaining that the few economic bumps in the road, such as the recent sluggishness in home starts, can be explained away by factors like the weather, and that there is now a pent-up demand for new housing. Walker said that the economy is expected to bounce back quickly, due to several factors:
• Stronger business investment in the coming months
• Stronger wage growth to complement payroll growth
• Optimism is fueling stock prices
• The Federal Reserve is not expected to hike rates before the second quarter of 2015
There are risks, to be sure, including deflation in the Eurozone, the China banking crisis and the ongoing Ukraine situation.
Beaulieu suggested that in preparing for the next year or two, management should invest both in efficiencies and customer market research. Find and eliminate bottlenecks in your operation. Plus, plan for higher wages and borrow money now, while rates are low.
We’ve struggled through highs and lows—including some pretty dismal lows—for manufacturing in this country, so make sure to take advantage of the coming years and capitalize while we’re riding relatively high.
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