Page 28 - Wire Rope News & Sling Technology - December 2018
P. 28

Forecast 2019

                                                   by Phillip M. Perry
         The coming year promises a robust business operating  environment,  with a
         growing  economy  supporting  healthier  profits.  The sunny  jobs picture  should
         brighten still further, sparking wage hikes that fatten consumers’ wallets. At the
         same time, economists are starting to see early signs of an eventual correction.

               usinesses should enjoy brisk eco-
               nomic tail winds in 2019. Corpo-
         Brate profits will continue to rise
         at a nice pace, and the improving job
         market will inspire consumers to spend
         freely.  It should all translate into a
         healthy operating environment for the
         coming  12 months,  although  econo-
         mists are starting to see early signs of
         an eventual slowdown.
           “The business  cycle  has  entered its
         boom phase,” says Sophia Koropeckyj,
         Managing Director  of Industry Eco-
         nomics  at Moody’s Analytics,  a re-
         search  firm  based  in  West  Chester,
         PA (  The nation’s total                                                                  illustration by jittawit.21 | iStockphoto
         revenues from goods and services, or
         the Gross National Product (GNP), the
         most commonly accepted  measure of
         economic growth, is expected  to grow
         at a 2.7 percent clip in 2019.
           Despite the generally sunny outlook,   level of business growth actually rep-  Wages rise
         the GNP forecast represents a mod-  resents a deceleration from the 6.9   There’s no doubt that consumer con-
         est  deceleration  from  the  3.0  percent   percent increase  expected when  2018   fidence  is  rising  in  response  to  a  hap-
         increase  anticipated  when  2018  num-  numbers  are  tallied, a moderation   pier jobs picture, one that should only
         bers  are  finally  tallied.  Why?  “There   largely due to an anticipated rise in la-  brighten in the months ahead. Moody’s
         are several reasons for slower growth   bor costs and higher interest rates.  expects unemployment to drop to 3.4
         in 2019,” says Scott Hoyt, Senior  Di-  Reports  from  the  field  corroborate   percent by the end of 2019, down from
         rector  of  Consumer  Economics  for   Moody’s readings.  “Our  member com-  the 3.7 percent recorded at the end of
         Moody’s Analytics. “The largest is that   panies  are  reporting  significant  up-  2018. (Moody’s Analytics first declared
         deficit-financed tax cuts at the start of   ticks in business  growth, and most   that the economy had reached the state
         2018  lifted  growth. No such support,   are anticipating a healthy 2019,” says   of what is often called “full employment”
         in  terms of an  additional increase  in   Tom Palisin, Executive Director of The   with its 4.1 percent showing in 2017).
         after-tax  income, is expected  in 2019.   Manufacturers’  Association,  a York,   “The fundamentals of the labor mar-
         In addition, job growth will be slower   PA-based regional employers’ group   ket look good at least into the mid-year
         because of there being fewer available   with more than 370 member compa-  of 2019 and probably longer,” says
         workers.” Finally, Hoyt notes that in-  nies ( “There is so much   Hoyt. “The nation is adding jobs faster
         terest rates will likely be higher, a fac-  demand they can’t keep up. Lead time   than the growth in the wage-earning
         tor that can have a softening effect on   has extended appreciably, from a cou-  generation,  so  we  expect a  further
         business investments.              ple of months a few years ago to three   tightening of the labor market in 2019.”
                                            to six months today.”                And it seems that healthy job growth
         Profits grow                         Business optimism rests atop a firm   is  finally  affecting  wages.  Average
           Going into 2019, business  owners   base  of  consumer  confidence,  always   hourly  earnings are expected to grow
         possess a lot of optimism. That’s fueled   an important  driver for the economy.   by 3.2 percent in 2019, up from the 2.8
         by healthy corporate profits, which are   “Consumers seem to be euphoric right   percent of 2018 and the 2.6 percent of
         expected to rise by 3.7 percent in 2019,   now,” says Hoyt. “The fiscal stimulus in   2017, according to Moody’s.
         according to Moody’s. “We expect cor-  the form of tax cuts, as well as the tight   “The recent rise in wages is very good
         porate  profits  to  benefit  from  the  tax   job  market,  mean  there  are  very  few   for the economy,” says John Manzella,
         reform mainly through  the lower  top   negatives  when  it  comes  to  consumer   a consultant  on  economics  and global
         tax rate and the new equipment accel-  fundamentals. The fact that consumer   business,  Buffalo, NY (JohnManzella.
         erated expensing provision,” says Koro-  confidence is near historic highs makes   com). “The more disposable money con-
         peckyj.  “Another positive to corporate   sense given the current conditions of   sumers have, the more they spend, and
         profits  is  the  rollback  of  Dodd-Frank   low  unemployment and the gradual   consumer spending represents 70 per-
         Act provisions,  which  had increased   increase in wages—even though wage   cent of the nation’s economy.”
         costs for businesses.”  The anticipated   growth is still not high.”                   continued on page 30

         28     Wire Rope News & Sling Technology   December 2018
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