WHAT RECOVERY' THE ALPHABET RECOVERY
Is the worst over? This economist says that, despite an only mild upturn, if those in the gas and welding industry plan accordingly they can still find prosperity.
Posted: January 28, 2010
Those in the gases and welding industry should be aware that discussion about the economy in 2010 is wrapped up in four letters: W, V, U and X.
?W? is used for those folks who are looking for a double-dip recession or even the onset of a full-fledged depression in the near term. Sorry, not going to happen.
?V? recovery means a sharp rebound to early 2008 levels of activity. This theory states that the U.S. will once again be powering along on all eight cylinders in short order. Sorry, not going to happen.
An ?X? recovery means that there really is no recovery for Main Street. This is closer to reality.
That leaves a ?U?-shaped recovery, and that is what we are expecting ? a broad, rocky bottomed, slow turn to increased levels of activity. Why a ?U?? Please read on.
BROAD, ROCKY BOTTOMED, SLOW RECOVERY
This type of recovery is consistent with current consumer and business-related activity. Neither suggests the near-term demise of the U.S. economy, but neither do they suggest robust growth anytime soon. It will take time for credit markets, businesses and consumers to recover from this long and painful economic recession.
We are forecasting that the U.S. economy will experience a mild recovery in 2010. In essence, a broad trough will occur through the near-term before we slowly begin to climb up the slope toward prosperity. All the talk about green shoots, record S&P 500 ascent and increased auto sales might leave you feeling that the recovery has already occurred. This has left some people wondering why the apparent good news has not quite played out in their markets or homes.
They are right to wonder; the recovery will not be easy to recognize. Business owners have told us that they have experienced increased inquiries, which is quite encouraging. But they also have reported that those inquiries have yet to translate into actual orders. Increased order activity makes for a recovery, not increased inquiries.
The recovery will not come in roaring like a lion. A slow, evolutionary process of recovery from market to market will be the likely economic path for the last few months of 2009 and into 2010. Take a proactive approach and tackle the recovery head-on by taking advantage of a more stable economic environment in 2010. It is time to make your move and start thinking aggressively in terms of marketing and advertising.
WHOLESALE TRADE TRANSITIONS INTO RECOVERY
Extrapolating trends from the Wholesale Trade numbers show us not only what has gone on in the market, but also what to look forward to, and therefore how to prepare. According to the U.S. Census Bureau, annual sales in Wholesale Trade recently were the lowest in over three years. A slumping economy, marked by a sharp decline in U.S. Industrial Production, has led to lower trade volumes across the U.S. durable goods market. Wholesale Trade of Hardware Durable Goods (NAICS code: 4237) is down 16.9 percent over the year-ago level.
The recent monthly and quarterly trends in Wholesale Trade are not particularly encouraging, but hope is on the horizon. Many leading indicators that we use at the Institute for Trend Research, such as Corporate Bond Prices, the Purchasing Managers Index and the U.S. Leading Indicator, are on the move upward. This leads us to believe the trend in Wholesale Trade will transition into recovery in early 2010. An improved trend for most readers is in sight.
Please use the next few months to plan on how you will take advantage of the recovery in 2010. Ask hard questions about your business, questions along the lines of:
? What are my competitive advantages and, concurrently, what are my competitor's weaknesses?
? Do I have the people I will need?
? Are they properly trained?
? Is my marketing plan geared toward a more discriminating purchaser?
? Do I have a properly targeted advertising plan?
? Will I have the cash I need to implement these plans?
? Have I secured financing and/or my banking relationships?
It is important to remember that we are not going back to 2008. Do not plan on a resumption of 2008 ?business as usual,? but rather a lower level of activity with an underlying inflationary environment. The worst is behind us, and we will soon be in a mild recovery. Plan accordingly, and you will find prosperity despite the mildness of the upturn
UNEMPLOYMENT & HEALTH CARE
Unemployment has been making the news lately, and it is not surprising given a 10.2 percent unemployment rate. Expect the rate to go higher as we head into 2010 and for the unemployment rate to be very slow in coming down as we traverse 2010. This is a lagging indicator and, as such, we would encourage you to not be overly concerned about more bad news here. You might want to consider this as an ideal time to hire some very talented people who can help you prepare for the recovery.
Healthcare reform has also been center stage as we go to press. It is hard to imagine that any reform passed in the early goings of the 2010 Congressional session will have any meaningful impact on the economy as a whole. The stock market may voice its opinion, but we are not expecting a revision to the macroeconomic outlook based on the passing of some form of health care reform. That does not mean we are not concerned about the long-term financial impacts of any bill that eventually becomes law; indeed, we are rather consumed with the twin questions of ?How are we going to pay for this?? and ?How high will insurance premiums be going??
MAKE YOUR MOVE
What are we all going to do? Let's start by shrugging off the lethargy of recession and donning the mantle of recovery. Let's get aggressive. Start setting goals, determine strategies and implement tactics. We will have to spend money now and over the course of the next year if we are going to thrive and gain market share. Those readers in the gases and welding industry who have the money will win handsomely as they reposition themselves in what should be a less-crowded marketplace.
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This article first appeared in the January 2010 issue of Welding & Gases Today Online.
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