‘2013 will be better than 2012’
February 1, 2013
COMMERCIAL, RETAIL, FABRICATION : TRENDS & ANALYSIS
Phase A: The data trend is either heading toward a low or is in the early stages of recovery. This is the first positive phase of the business cycle.
Phase B: The data trend is accelerating in its ascent, and growth is occurring above year-ago levels. This is the second positive phase of the business cycle.
Phase C: A decline is in place. The data trend is decelerating in its ascent or has stopped its rise, but it is still above last year. This is the first negative phase of the business cycle.
Phase D: The data trend is in recession at levels below the year-earlier level. This is the final phase and the second negative phase of the business cycle.
Data as of December 2012.
“The ITR Trends 10 compares the current cyclical status of 10 major benchmarks of macroeconomic activity as they move through this business cycle and into the next,” says Jeff Dietrich, senior analyst, ITR. “Think of the Trends 10 as a train with 10 cars. The majority of the ‘cars’ have gone through a soft landing for the 2012-2014 cycle. Note that not all of the remaining cars will go down into a hard landing. Many are likely to pass through a low between Phase C and Phase B without going into Phases D and A. This is the essence of the soft landing we are projecting for this business cycle.”
The U.S. construction sector, in addition to the overall economy, will continue to accelerate at a mild pace throughout 2013, according to the ITR Trends 10 report from ITR Economics. “2013 will be better than 2012,” says Jeff Dietrich, senior analyst. “2013 will see changes in taxes, but the economy overall is relatively stable and still growing, albeit at a milder pace than many would like. … There is no quick fix for construction, or this economy.”
According to the ITR Trends 10 report, nonresidential construction and housing are poised to enter Phase C of the business cycle, meaning they will continue to grow, but at a slower pace. “Phases B and C are growth phases of the business cycle,” Dietrich explains. “Construction trends are accelerating out of their steep recessionary hole, especially housing, which is up more than 28 percent from one year ago.”
Nonresidential construction segments currently on the rise include commercial construction, private higher education, private health care, office and private lodging. The exception is publicly funded nonresidential projects, which are in Phase D of the business cycle and remain below year-ago levels.
“State, local and even federal projects not already funded have been put on hold,” Dietrich says. He points to three causes: slow employment gains, inflation that is at pace with wage increases, and a disappearance of stimulus dollars. “It’s more likely that federal projects will go forward than state and local, which are still battling huge deficits left over from the recession. A bottom is forming, but it will be another two years before cities, towns and municipalities feel like they can open the coffers and spend more.”
ITR forecasts that nonresidential construction will move through Phase C in 2013, growing at a mild pace, before experiencing a soft landing by mid-2014. Housing, on the other hand, “may be flat in 2014, but nothing like 2008,” Dietrich says.
As the glass industry continues to dig out from the recession, Dietrich encourages companies to be smart and not shy away from investing. “The world rebooted in 2008 for many industries, but did not die. Many are coming out stronger, wiser and more profitable than before. It can be done.
“The next several years will see ongoing growth in construction sectors,” he says. “Glass industry members need to focus on providing better products at competitive prices with exceptional service. … Work on relationships in 2013. Watch your balance sheets, control inventory, and increase market share, and revenues will rise in 2014. Offer new products and/or services, and increase your sales team,” Dietrich advises.