ASA Advisor: Prepare for 2019 mild recession
ASA’s Advisor, produced for association members by ITR Economics, noted in its May edition that U.S. industrial production during the 12 months ending in March was up 2.5% from the same period last year and adds activity is rising at an accelerating rate throughout the industrial sector.
ITR advises to use the current time to build up cash reserves that will better position a company to weather the mild recession in 2019.
Construction, transportation and fuel prices all are increasing at accelerating rates, ITR notes. ITR says to make sure proper price escalators are in place to pass on higher costs to customers when needed. ITR anticipates producer prices to decline late this year and through much of 2019, thus expect be able to lock in lower prices next year.
ITR observes inflation is rising in part due to growing employment. A tight labor market, it explains, is driving up competition for workers and lifting wages. ITR predicts employment will grow at an accelerating rate throughout 2018. With low unemployment, it adds, finding qualified new workers will be increasingly challenging.
ITR suggests evaluating compensation packages to ensure they are competitive enough to attract new employees and focus on retention to avoid recurring costs to find and train new workers.
ITR’s long-term view shows slowing growth in 2018, a mild recession in 2019 and growth in 2020.
Elsewhere in the Advisor, the U.S. Rotary Rig Count is expanding, but the pace of rise is slowing, ITR notes. Downward cyclical movement in this industry likely is to persist as signaled by ITR Checking Points. ITR suggests building a backlog of work to keep busy while the market is on the back side of the business cycle this year.
On the wholesale trade front, ITR reports wholesale trade tentatively transitioned to a slowing growth trend, which is one quarter earlier than ITR’s projection. ITR says to plan for decelerating growth in 2019.