Taking the bad with the good in 2011
In anticipation of the coming year, I polished my crystal ball, hoping for a clear picture of what 2011 would bring personally and professionally. Unfortunately, the picture was a bit blurry, clouded by a stagnant economy and cautiousness among forecasters regarding the year ahead. While most agreed the economy would grow, few completely ruled out the possibility of a "double-dip" recession. While they said total construction starts would rise, they also cited a number of variables that could affect those predictions. Overall, I got the distinct impression that everyone was hedging their bets in regards to 2011. It seemed the only sure thing was that recovery would be slow, for the economy, the construction market and, consequently, our industry.
In times like these, it would be great if economists could tell us exactly what to expect so that we could prepare. Wishful thinking aside, we do have the opportunity to familiarize ourselves with the economic and construction forecasts, and prepare for the future in the way we're most comfortable. With that in mind, the January 2011 issue of Glass Magazine features articles on the overall economy; the nonresidential, housing and remodeling markets; as well as the fabrication segment.
Some highs and lows for the year ahead:
First, the good news. For the construction industry, "the worst is over," according to Keith Fox, president, McGraw-Hill Construction, New York. Following four years of decline, total construction starts are expected to move in a positive direction in 2011, increasing eight percent over 2010 to $446 billion. See "The slow climb."
The bad news: Both nonresidential and residential construction starts will remain far below pre-recession peaks this year, leaving the construction segment with a long way to go before we can rest easy. There is also the lag time between construction starts and spending to consider. Construction starts typically lead construction spending by at least a year, explains Gary Danowski, vice president, PPG Industries, Pittsburgh. "Because glass is one of the later expenditures in the construction cycle, it will take a while for expected growth to positively impact the glazing industry," he says.
The good news: For retailers, the remodeling market shows potential in 2011, with homeowner spending expected to increase 12.8 percent this year, according to Harvard University's Joint Center for Housing Studies. The recovery began in fourth quarter 2010 and should pick up steam going into 2011, buoyed by low financing costs and a wave of previously foreclosed homes coming back on the market and in need of renovation, according to Kermit Baker, director of the JCHS Remodeling Futures Program. See "Delayed reaction."
The bad news: For those offering window replacement services, tax credits—or the lack thereof— could affect business this year. On Dec. 4, 2010, the U.S. Senate rejected a proposal by Sen. Max Baucus (D-Mont.) that sought to extend and modify the existing home retrofit tax credit for windows that qualify toward energy-efficient home improvements, according to a release from the American Architectural Manufacturers Association.
The good news: Fabricators are taking advantage of slow market conditions to reevaluate their business plans and product mix, according to Glass Magazine's informal survey. Nearly 70 percent of those surveyed said future expansion plans included adding new products. That said, a significant percentage of fabricators are taking a “wait and see” approach to 2011, with 25 percent of those surveyed reporting they had no expansion plans in place.