Economist Tells Glazing Executives to Take This Time of Opportunity to Grow Business
September 12, 2011

By Sahely Mukerji

Jeff Dietrich, senior analyst at the Institute for Trend Research in Concord, N.H., made his economic forecast, “Beyond the Great Recession,” at the 6th Annual Glazing Executives Forum, on September 12, at GlassBuild America, September 12-14 in Atlanta.

“I saw this somewhere: ‘There are only two things to worry about,” Dietrich says. “Either that things will never get back to normal, or that they already have.’ So what’s the point?”

Here's the point, Dietrich says. According to the September 1992 Time: “The U.S. economy remains almost comatose. The current slump already ranks as the longest period of sustained weakness since the Great Depression. Once-in-a-lifetime dislocations will take years to work out. Among them: the job drought, the debt hangover, the defense-industry contraction, the banking collapse, the real estate depression, the health-care cost explosion and the runaway federal deficit.”

“That Time article was written when there was a 3.1-percent dip in industrial production to GDP,” Dietrich says. “Today we have a 14.6-percent decline.

“When we come out of a recession, we accelerate, partly because of stimulus dollars, partly because we sell off things to survive. And then there’s something called slower growth. It’s not double-dip recession, it’s not a recession, but slower growth. The operative word being ‘slower.’ The direction of this economy is upward. You need to be planning for it, hiring for it and purchasing for it.”

This year will see a slower rate of recovery, Dietrich says. “2012 will be ongoing recovery. 2013 flattens out and recession begins. 2014, he predicts, will be mild recession. 2015-2017 will be growth.”

In nonresidential construction, total new construction is currently down 5.4 percent vs. last year, and is projected to be 7.8 percent higher in 2012. Commercial construction is down 6.2 percent, projected to grow 2.5 percent next year. Private health care is down 4.4 percent, estimated to grow 7.2 percent next year. Multi-retail is 8.6 percent down, and estimated to go up 4.5 percent. Residential construction is 3.2 percent down, and estimated to grow 4 percent. And total local and state government construction is down 4.3 percent and estimated to further down 2.2 percent.

Manufacturing had the best year in 2010 in the last 25 years, and now it ha’s slowed a little bit, Dietrich says. “It's slowed in Europe, China, India, Russia, everywhere, it’s a slow patch. We’ll pick up in 2012. I don’t think construction will be hit by the 2014 recession. You’ve already paid your dues. This is the time for opportunity in the business cycle. Up is not always good, and down is not always bad. Business cycle is a cycle, and a cycle is what it is. Starbucks is a good example. It shut down all its stores in new York City. They made a mistake.”

Employment’s not going to improve rapidly, Dietrich says. “The Federal Reserve and the Administration have both said that unemployment will be in 8.5 percent during the next election. Don’t track unemployment, track employment. 150,000 jobs a month keeps us in the 9 percent unemployment.”

We’ll be in an inflationary era over the next decade, Dietrich says. “There’s way too much money in the system, corporate America has $2 trillion, banks have $1.2 trillion that they’re sitting on. The Federal Reserve’s not worried about inflation, even though it’s been up over 3.6 percent on a quarterly basis, year-over-year. Businesses are paying more already. Producer price cost is 5-percent more and will be 7-percent more in the next few years. We have a weak dollar, meaning everything we buy in this country costs more.”

Also keep in mind that the world is changing. “Eight hundred million to 1 billion people are moving to middle class from poverty level. What does the middle class want? They want houses, clothing, KFC, and we have that stuff. Thanks to the Internet, we can sell those stuff in our PJs.”

Retail sales shows a fair picture, Dietrich says. “Jewelry sector is doing very well. Is that a sign of a depressed economy? Americans are buying but not using their credit cards. We also have $621 billion in personal savings.”

U.S. leading indicators don’t show a collapse, Dietrich says. “It measures 10 different components of the economy, and leads by 10 months like the Purchasing Manager. Economy will not turn around in a day, it’ll take time. You can live in fear or take risks.”

The seven must-watch items are: the U.S. leading indicator, the Purchasing Manager Index, retail sales, employment; nondefense capital goods new orders; money supply; and corporate bonds rate-of-change, Dietrich says.

“Embrace ‘uncertainty,’ ” Dietrich says. “We see the future as years of growth ahead. Certainly, there won’t be an accelerated boom, but understand that what got you here won’t get you there. This is like things got rebooted, and you can’t find any buttons where they were before. But you’ve got to have that fire in the belly attitude. Borrow money if needed. It’s not to buy a yacht, it’s to build your business, to make a difference. Hire. If you hire a college student today, it’ll be three years before you have to pay them what they should get paid. In the long-term future, it’s not a question of taxing the wealthy, it’ll be a question of taxing wealth. It’s going to be a means testing when you get ready for Social Security. The shift is being made now.

“The U.S. still accounts for 23.3 percent of the world GDP,” Dietrich says. “Warren Buffett was right. If you’re born in the U.S., you’ve already won the lottery.”

GEF also featured breakout sessions.

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