The economy continues to weigh heavily on the minds of industrial finishers and
suppliers alike. By most accounts, the US manufacturing sector had been in decline
well in advance of the broad economic recession that started two years ago, and
many of us who’ve been told that positive change is just around the corner
stopped believing it about a year or so ago. Certainly, the most recent numbers
released by the Federal Reserve don’t do much to suggest that we should believe
otherwise:
- In April, the Fed reported that there was a 0.5% decrease in industrial
production (for the month of March), the biggest decline since December 2002’s
0.8% decline. Wall Street analysts had previously estimated that the slide would
be closer to 0.2%. The Fed had previously announced a 0.1% increase for February,
but that number was revised to a 0.1% decrease later in the month.
- Factories, mines and utilities also ran at a slower pace in March, using
only 74.8% of their total capacity, the lowest reading since December 2001.
Still, not all the news is bad. Though consumer confidence remained low in March,
many economists have speculated that a brief, successful war could have a positive
impact on consumer confidence and the economy in general. With the “main
fighting” in Iraq lasting just three weeks, we can probably expect at least
a small increase in consumer confidence. Whether that increase turns out to be
just a quick—and unsustainable—boost or something with lingering implications,
remains to be seen.
Another positive sign lies in the fact that the overthrow of Saddam Hussein and
the subsequent fall in oil prices should “remove a large risk to the health
of the world economy,” according to the G7 finance ministers and representatives
of the International Monetary Fund and World Bank, following a recent meeting
in Washington, DC. According to the ministers, the global economy should improve
over the next six months with the return of consumer and business confidence.
One finance minister termed his outlook as “hopefully optimistic.”
On a far less scientific (but often-times more accurate) note, it’s worth
mentioning that in virtually every plant visit, telephone call or e-mail communique
I have with a plant owner or supplier, I like to ask the question, “how’s
business?” These days, it seems like I’m hearing a lot more of “not
too bad,” or “we’re hanging in there,” than I was a year ago,
when the patented response seemed to be “don’t ask.” Job shops
that offer a variety of products and services have managed to stay in the best
shape, and there is definitely a sense of optimism—however marginal—that
wasn’t present during these conversations 12-14 months ago.
So, what’s the answer to my question? How much longer until we see a noticeable
improvement in the economy? Three months? Six months? Two years? I’m not
even going to try to wager a guess, though I suspect the answer is closer to six
months than two years. Then again, maybe it’s just around the corner.
