Page 26 - Wire Rope News & Sling Technology - December 2019
P. 26

Forecast 2020


                Happy consumers, slowing growth


                                                   by Phillip M. Perry
         Businesses face a challenging economic environment in 2020. Full employment,
         happy consumers, a robust housing market and low interest rates are supporting
         a decent economy. But fallout from the tariff wars, a shaky stock market, and
         a looming recession are creating uncertainty in the nation’s boardrooms and
         contributing to a slowdown in business activity.


          A     slowing economy. Costly tariffs.
          A
                Brexit angst.  A  presidential
                election. A shaky stock market.
         Rising labor costs. A looming recession.
           And happy consumers.
           Those are the ingredients of a mind-
         bending cocktail  of  economic  uncer-
         tainty now eroding business confidence
         and capital investment. Despite a state
         of full  employment, robust  consumer
         spending, low interest rates and a
         strong housing market, forecasters are
         predicting a challenging operating en-
         vironment in the year ahead.

         SLOWING GROWTH
           “We look for the economy to grow be-
         low its potential in 2020,” says Sophia
         Koropeckyj,  Managing Director  of In-
         dustry Economics at Moody’s Analytics,
         a research firm based in West Chester,                                                                 Illustration © ekapol | iStockphoto
         Pa.  (economy.com).  “Corporate  profit
         margins  have been compressing  no-
         ticeably as  growth  in  labor  costs  has
         outpaced revenue  growth.  Shrinking
         margins are often associated with late-  employers’ group  with  more  than  370   HAPPY CONSUMERS
         cycle expansions and often cause busi-  member companies (mascpa.org). With   The current economic picture is not
         nesses  to be more cautious  in  hiring   its diverse membership in food process-  lacking bright spots. The most pro-
         and investment.”                   ing, defense, fabrication, and machin-  nounced is a consumer  who seems
           Moody’s  expects the  nation’s  Gross   ery building, Palisin’s group can be   largely contented with the way things
         National Product (GNP) to slow to 1.7%   seen as something of a proxy for Ameri-  are working out, thanks to healthy em-
         in 2020, down from a more normal 2.3%   can industry.                 ployment levels that are filling pockets
         anticipated when 2019 numbers are fi-  Despite  the  slowdown,  says  Palisin,   with  spending money.  That’s impor-
         nally tallied. The 2019 performance is   most of his members continue  to en-  tant,  because  consumer  spending  is  a
         a decline from the 2.9% growth clocked   joy good profits and to hire when they   powerful driver of business activity,
         the previous year. (The GNP, the total   can  find  the  right  workers.  That  suc-  representing  some 70 percent of the
         of the goods and services produced by a   cess,  though,  is  tempered by a year-  nation’s economy.
         nation, is the most commonly accepted   long  gradual decline  in  the  lead time   The unemployment rate was running
         measure of economic growth.)       required  to  fulfill  orders—a  common   at an enviable 3.7% toward the end of
                                            indication  of  decelerating revenues   2019, well below what many economists
         STRONG HIRING                      throughout the supply chain.       label as “full employment.” Employers
           Reports  from  the  field  reinforce   “Manufacturers  experienced  signifi-  have been consistent in their hunt for
         Moody’s calculations. “In the last part   cant  lead  time  in  the  first  quarter  of   workers to fill a growing number of po-
         of 2019 concern about tariffs resulted   2019 as a result of high  demand and   sitions. “Monthly job growth has been
         in a slowdown in the automotive and   capital spending,”  says  Palisin.  “Lead   more than enough to keep up with the
         agricultural sectors, and a lower level   time shortened as the year progressed,   growth in the working age population,”
         of orders caused some companies to re-  to what is now  an average level. We   says Koropeckyj.
         duce their size,” says Tom Palisin, Ex-  expect lead times to remain average in   Looking  ahead to 2020, economists
         ecutive Director of The Manufacturers’   2020, due to headwinds that may mod-  expect recession fears to have a damp-
         Association, a York, PA-based regional   erate economic growth.”                       continued on page 28
         26     Wire Rope News & Sling Technology   December 2019
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