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Woodworking Network editors polled a broad cross-section of industry experts and thought leaders, asking them to peer into their crystal balls and offer predictions for the year ahead. Most are fairly optimistic, but many cited uncertainties about the effects of international trade disputes and election politics on business as the year progresses.
Alan Beaulieu, president and a principal with ITR Economics, is an economist with particular insights into the woodworking industry and related fields. He recently spoke at a convention of the North American Building Material Distribution Association and offered predictions based on a sophisticated system of tracking trends in leading indicators that has proven to be extremely accurate.
He prefaced his remarks noting the concerns people have expressed about uncertainties in politics and the economy. Emphasizing that his company does not take sides politically, he pointed out historically that the average rate of growth of the economy has been roughly the same regardless of the party in power. He also emphasized that the stock market does not equal the economy, meaning that stocks could be up in a down economy or down in an up economy. He also cautioned people against embracing Modern Monetary Theory, a concept that argues that government debt does not matter because governments can always print more money, but Beaulieu said that has never worked in the long term in the past and the current debt level is worrisome.
He predicted the economy would stall through the end of 2019 and into 2020. Then it will be followed by a significant growth through the next decade, ending in a major depression about 2030. He called the coming 10 years the “decade of the Millennials” and urged companies to capitalize on Millennials’ ability to find poorly performing products, processes, and people in organizations. Beaulieu called these poor performers “Bassett hounds,” and suggested companies pay their Millennial employees “$500 for every Bassett hound they find. Millennials are great Bassett hound finders,” he said.
Of course, there are many experts in the industry who are not trained economists but nevertheless have insights from their own perspectives. Here are a few we’ve collected.
Stephen V. Carter, president and CEO of Williams & Hussey Machine Co., and president of the Wood Machinery Manufacturers of America, jokingly says his crystal balls are “cloudy.” While recognizing all the uncertainties in the economy, he is cautiously optimistic. “I am hoping that the economy continues strong and that the Feds don’t mess it up with an unneeded monetary policy,” he said. “That consumers continue to buy, remodel and restore homes, churches and public buildings. We need consumer confidence to keep things going.”
Mike Harris, sales operations manager at Newman Whitney, said, “Globally it appears that most of the world is enjoying a good economy. But it’s anyone’s guess as to when and where this will start to shift downward. We currently remain optimistic about the next 12 months.”
Mitch Taylor from the Woodworking Institute in California said, “General woodworking business outlook: It looks like it will continue to be strong in 2020, including education, medical and commercial markets. Multifamily residential may slow in SoCal as large numbers of units are just hitting the market. Our segment (quality certification): Looks very positive. Trends: Architectural firms seem to be leveling off, so for the long term things may be leveling out or starting a slight decline.”
Nick Allison, analytics manager at Columbia Forest Products, said, “Our expectation is a moderate increase in total US housing starts. However, we expect divergence between starts—which should see a fairly significant uptick—and multi-unit starts—which we expect to decline from 2019. Woodworkers who primarily service single-unit homes can expect a very nice 2020, while those who service multi-unit homes should explore ways to diversify their customer base. We expect the domestic hardwood plywood market to see moderate growth in 2020, to the tune of 3-5 percent growth over 2020 (assuming no impact from the AKCA case).”
Dave Rakauskas, executive vice president of Colonial Saw and president of the Woodworking Machinery Industry Association, said, “The good news is there is a pretty big backlog of projects planned and the woodworking industry is usually safe for at least a year after the project planning starts to dry up. We are fortunate that we can use Civil Engineers workloads and new project permits as a leading indicator. Finished woodworking comes a little bit down the project line and all the civil engineers and construction planners I talk to say they’re still busy. We are planning for a Flat year in 2020. The strong U.S. dollar does make European machinery more affordable and most of the woodshops in America are filled with high-quality European equipment.”
Federico Broccoli, president/CEO of Biesse America, said, “We are seeing a little bit of drop (in the economy) focused in a few areas of the world. It’s not North America – the U.S. is going very well, and also Canada. Also no problem in most of the regions of Europe. Customers say they are very busy, but we see they are looking to automate -same space but more output, so searching for efficiencies, searching for innovation.”
Peter Tuenker, managing director, IMA Schelling, said, “With all the political woes and all the coverage you have on TV every night – I think Washington is trying to compete with Hollywood these days – still with all that, we see a very strong basis in our industry, even stronger now than it was a couple of years ago. I know people have been talking about a possible downturn, but we’re not seeing it at all. We’re basically good already for this year and next year, and we’re already looking at 2021.”
Justin Rinaldi, marketing manager, Safety Speed Manufacturing, said, “It’s no secret that rising costs have negatively impacted United States Manufacturers, even our own US steel has increased significantly. Despite these rising costs, our long-term relationships with our customers have kept a steady flow of business, even with price increases we have been forced to pass along. The world’s economy is fully dependent on the economies it’s comprised of. The biggest challenge the world economy faces is a lack of cooperation. At the end of the day, cash is always king and the bottom line boils down to ‘Would companies export so much of their business to other parts of the world if they weren’t going to make a lot of money?’”
Andy Turner, vice-president sales, Weinig, said, “The world continues to seem smaller and smaller which results in more and more companies doing business globally. Our customers are no different. Many woodworking companies today are buying from and/or selling to companies in foreign countries. While different regions may have their own ideas of how to produce wood products, many of these wood products are similar which creates competition around the world. Our customers are no longer only competing against the efficiencies of the shop down the street. Now they must compete with the efficiencies of companies in Europe, South America and Asia. This means that they are going to have to consider implementing new solutions to make their production more efficient and productive. This is why we exist. We are here to help our customers succeed in this new environment with these new competitors.”
Giuseppe Riva, CEO, SCM North America, said, “The current geopolitical situation is very fragile. We are on a roller-coaster and, moving forward, our industry is tasked with a market that is compressing all the phases: the ability to respond immediately to transitioning trends, convert quickly the idea into production eliminating the inefficiencies and downtime, minimize any in-process stage that is immobilizing capital.
“The tendency will be to evaluate extra carefully all decisions, especially with a long-term commitment, from which it’s complicated to disinvest. Consequently, we will have an impact in the philosophies governing the labor, especially for workers and for the go-to-market strategies.”
Gordon Burdis, vice-president sales, Taylor Mfg., said, “Tariffs have affected some of our raw material costs and lead times. We are working with our suppliers to ‘Buy Smarter’ by looking at Economic Order Quantities for our business and seeing where they line up with our suppliers. If we can buy a few hundred more pounds of steel, for example, that we know we will use, our vendors can offer a more competitive price to us, which keeps our costs down and the prices of our machines more competitive.
“The world economy is relatively unstable, and for any company exporting goods, this would mean a drop in International business. At Taylor, we have felt this exact thing, so have put more of the focus on the North American market, which is quite strong.”
Dennis Smith, international sales manager for Mereen-Johnson, said, “Tariffs affect us both negatively and positively. American tariffs on Chinese manufactured wood products make Chinese products more expensive. These increased costs have driven wood manufacturing, especially furniture manufacturing out of China and into Vietnam where we are providing machines for the growth of the Vietnamese furniture industry. Our view on the global economy remains positive and the effect on our industry will be positive as well.”
Olaf Rohrbeck, managing director of Burkle, said, “Overall, I am not an optimist, I’m a realist.” He sees increased activities in the United States in reaction to trade wars. Burkle has a new technology center in the U.S.
Juergen Koppel, CEO of Leitz, said, “Tariffs, especially one-sidedly implemented tariffs, were never a solution for economic disputes. I am a strong believer in the power of the market and the customers, so an environment for fair trade has to be created. Unfortunately, our global economy is significantly impacted by the uncertainty created by the political turbulences going on. I hope that fair solutions will be found soon.”
John Schultz, president of Super Thin Saws, said, “Economy seems solid to me, but I’ve been fooled a few times. Tariffs seem like a really bad idea, but they haven’t hit us directly, at least not very hard (yet).”
Chris Dehmer, president of the Cabinet Makers Association and owner of Dark Horse Woodworks in Atlanta, Georgia, said, “Things are very good for me in my market, especially with my specialty for modern work. Like everyone else, the negative trends are people and the unknown of the election year. In the CMA’s recent Benchmark Survey, the outlook for the smaller shops is primarily positive for 2020.
“The survey data is interesting, but what I find of most value are the verbatim comments, especially the answers to the question about the general health of their business, their local economy, and the future of the industry in general. One respondent perhaps summed all three up best with the simple statement of “slow, steady growth.”
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