Growth to Continue in 'Politically Agnostic' Economy - Modern Distribution Management

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Growth to Continue in ‘Politically Agnostic’ Economy

Improvements were expected no matter who won the White House.

The U.S. economy was improving before last month's presidential election and will continue to strengthen in 2017 – growth that has nothing to do with who won the White House, according to Alan Beaulieu of ITR Economics.

The economy is "politically agnostic," Beaulieu said last week while outlining how better days were already ahead for the U.S. at the Heating, Air-conditioning & Refrigeration Distributors International annual conference last week in Colorado Springs, CO.

The U.S. is in growth mode – albeit slow growth – he said, not recovery. Though companies shouldn't "pine for 4.5 percent growth," which is unattainable, they can expect modest improvement for the next two years before an expected recession at the end of 2018 and into 2019.

Beaulieu projects increased foreign direct investment, saying "foreigners are coming from around the world to do business here, and it's a good thing," and increased wages, meaning companies should raise prices in 2017 or risk declining profitability.

His message to HVACR distributors wasn't the only positive news for an economy mired in slow growth and meager consumer confidence. Recent reports also paint a brighter picture.

For example, the Conference Board Employment Trends Index increased in November to 130, up from 129 in October. This represents a 2.7 percent gain in the ETI compared to a year ago.

New orders for manufactured goods in October, up four consecutive months, increased 2.7 percent to $469.4 billion, according to the U.S. Census Bureau.

And while employment in manufacturing, mining and wholesale trade changed little over the month, according to the U.S. Bureau of Labor Statistics, total nonfarm payroll employment rose by 178,000 in November, and the unemployment rate declined by 0.3 percent to 4.6 percent.

Not everyone is convinced that the country is poised to prosper, including some respondents to the MDM Industry Outlook Survey.

"Generally speaking, economists are saying that 2017 should hold modest growth for distribution and manufacturing," said one respondent who works in the bearings sector. "We're skeptical though – we have been hearing for two years now that manufacturing will recover in six months. We're still in a manufacturing recession and no longer take much stock in forecasters. We're pessimistic about market growth and doing all we can to take share from our competitors to grow top-line revenue."

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