GlassBuild America 2012 report: The economy: Where we are now and where we're headed
“Make your move,” economist Jeff Dietrich advised the 200 attendees at the 2012 Glazing Executives Forum, held Sept. 13 as part of GlassBuild America in Las Vegas. "Invest time, money, personnel. Move forward and innovate," said the senior analyst for the Institute for Trend Research. "Embrace uncertainty. Get over the fear and the past. This is not about looking forward through the rearview mirror."
Indicators show there are no signs that the U.S. economy is fading or collapsing; growth is above year-ago levels and more gains are expected, Dietrich said.
Michael Collins, managing director of Building Industry Advisors LLC, agreed, telling attendees to his GlassBuild America seminar, “Now is the time to make investments and re-engage with customers. Increase your advertising, ask [customers] what they want, what they need, and respond.”
The United States has experienced growth in industrial production and GDP for more than three years, “and we will continue to be growing for the next six quarters,” Dietrich said. However, because the losses were so steep at the beginning of the recession, companies might not feel the growth yet.
“You may not feel terrific, but this economy is growing. It is just growing at a mild pace—the mildest since World War II,” Dietrich said. “What everyone wants and expects is that somehow there is going to be pent-up demand that will release itself onto the economy. We haven’t seen it yet, and in our long-term forecast, we don’t see it until 2015.”
Dietrich said ITR’s forecast shows the economy will grow through 2013, experience a mild downturn in 2014 and grow again in 2015. “We are not concerned about 2014. It will be a mild dip in the overall economy,” Dietrich said. “We want, and believe, that if businesses know what is coming, they can prepare.”
ITR’s growth forecast is based on a series of factors:
- Liquidity is not an issue, as “there is so much money on the sidelines.”
- The government is operating with a stimulative monetary policy.
- Companies have right sized. “Companies are in much better shape than they were before the recession,” Dietrich said. “Rightly or wrongly, you are much more measured in your decisions than you were four years ago.”
- Bank lending is improving.
- Consumers are spending.
- Construction is gaining momentum.
- Deficit spending continues.
Slow going in the construction market
Both the nonresidential and residential construction segments are experiencing year-over-year growth, but that growth has been―and will continue to be―slow.
"Nonresidential construction is 14 percent above one year ago and showing surprising strength,” Dietrich reported. “Although the gains are well below the historic peaks of 2008, the recovery touches a broad swath from commercial to health care, manufacturing to malls, sports arenas to education institutions."
Collins agreed. “We are seeing recovery of commercial construction. This sector fell off shortly after residential. But, on the chart, we see a fish-hook at the end of the decline in office, retail and lodging. They are improving and starting to pick up.”
While some nonresidential sectors can expect more accelerated growth, others will continue to struggle, Dietrich said. “It will be hard for those building public schools. It is coming back, but coming back slowly. State, local and federal governments have pulled back on construction as tax dollars have dried up.”
Because nonresidential construction lags the rest of the economy, Dietrich forecasts the sector―which recently started to pick up―will continue to rise. “However, it’s not going to be any stronger than the rest of the economy has been over the last year,” he said.
“If you’ve been, in total, down 65 percent from the peak in ’08, then what you’re seeing―the tiny climb back up―is not the news you want to hear,” Dietrich said. “The fact is that the fundamentals are not there. Office vacancies are at 17 percent; retail is just coming down from historic highs.”