A Look Ahead at the U.S. economy and construction sector

The reality is that the economy and your future are looking good through the middle of the year.

Alan Beaulieu

The media has had a lot to say about the bad weather earlier this year and tough economic data. My fear is the worrisome news could lead you to conclude that the business cycle is weakening underneath you and that it is time to hoard cash and say “no” to new initiatives. The reality is that the economy and your future are looking good through the middle of the year with only a slower rate of growth likely in the U.S., and in residential plumbing trades, later this year and into 2015. The commercial construction sector promises increased opportunities through the rest of this year and into 2015.

The December and January figures for the US Total Wholesale Trade of Hardware, Plumbing, Heating Equipment & Supplies did not show any ill effects of weather. The 3.1% decline from November to December was mild by historical standards and the December-to-January increase of 4.1% was better than average. The industry is posting a solid 5.0% annual growth rate with sales cruising at a record-high $116.3 billion. Expect a slower rate of rise later this year, but at this level of activity it may give you a much-needed opportunity to catch your breath and plan for how you will handle the work when you are busier next year.

The February employment number was good and shows employment climbing. There was a 1.3% increase in employment from one year ago (BLS Household Survey data, not seasonally adjusted). This is a reasonable number; not great, but good enough to indicate the economy still is expanding in terms of jobs. The good news from the employment data is encouraging on its own, but it is only one of a number of indicators signaling more economic growth through the near-term. The ITR Leading Indicator trend and the University of Michigan’s Consumer Expectations survey both are throwing off encouraging signals in terms of ongoing economic expansion (no recession this year). Throw in a resurgent S&P 500 in February and the signals are telling us that we should all look for the economy to slow down, but not break down in 2014.

The events in Ukraine have been headline news in recent weeks. It is reasonable to wonder how events there might impact our forecast. The answer is that we don’t expect much (if any) fallout for the U.S. The EU and Russia bear the economic risks in this scenario. The economy of Ukraine is about equal to that of Kentucky, which is not enough to change the course of events for 21.9% of the world’s economy (the U.S.) unless sanctions spread to more drastic occurrences. Assuming just the sanctions bantered about so far, it is the EU that will likely feel the pain via higher energy costs. This is a huge political crisis, but for most Americans it likely will remain only a political issue and not an economic one.

Alan Beaulieu’s 2015 Industry Forecast will be presented at NetworkASA 2014 at the Bellagio in Las Vegas, Sept. 9-11. In late spring/early summer, Alan will preview this presentation with a members-only ASA webinar. Please watch your email and visit www.asa.net for more information.