“This is a sustainable recovery. It will be slow and rocky, but it won’t be a double-dip recession.” That was the good news delivered by Alan Beaulieu, President of the Institute for Trend Research and senior economic advisor to the National Association of Wholesaler-Distributors, speaking the Stiles Executive Briefing Conference March 2. Beaulieu is regarded as one of the country’s most accurate forecasting economists, and has the dubious distinction of predicting the current recession in 2003.
Beaulieu showed the assembled wood products manufacturers his charts tracking the ratio of industrial production to Gross Domestic Product, which showed an upturn in February. He predicts that upturn is the turning point. “I’m declaring the recession over today, but there are significant challenges ahead and how companies come out of this downturn will impact their future health,” says Beaulieu.
He cited three challenges to manufacturers and the business community will face in this recovery.
1. Beaulieu thinks the actions of previous and current Congress and administration have actually dulled the growth of the U.S. economy – the market would have recovered faster without government interference and stimulus packages. As a result, recovery will be slow and industrial production won’t reach the levels we were at in 2000 until 2015 to 2017. “We’re going to have to get used to slow growth,” he said.
2. Inflation is going to be a very real threat and problem, and Beaulieu sees it gaining strength in 2011 and 2012. “Inflation is going to make life tough on your workers, and you are going to have to think about raising wages,” he says. But with the combination of today’s low inflation and low interest rates, companies should quit holding back on investment and plan for the future immediately. “Buy capital equipment now. Renegotiate your leases. Lock in all the costs you can with long-term contracts,” he says.
3. Government spending has to change dramatically. Beaulieu says our deficit spending has brought the country to very high financial risk, and drastic changes will have to happen in the next 10 years to repair it. “Taxes will have to be raised, and this will stifle growth. Change will have to occur in our taxing and spending policies.”
Even with those problems, Beaulieu told the group there are many reasons for optimism. Despite the myths portrayed in the popular press, manufacturing is alive and well in the United States.“We have demographics in our favor, we have a strong manufacturing base, and we have the resources,” he says.
“We’ve been through an unprecedented recession, but we are just at the start of the recovery cycle. There will be opportunity, but how you react to the recovery is critical for the long-term health of your company.”
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