In my conversations with CEOs from
a cross-section of industries and markets,
they see activity improving and profits
holding, but they remain concerned and
frustrated that their ability to set long-term goals is being thwarted by short-term-thinking politicians. The fear factor has
some taking a wait-and-see attitude, hoping the elections might bring clear skies.
OR WILL THE SKIES CLEAR?
In our view, taking a wait-and-see approach
is not the best choice. Even if all of the tax
increases are enacted, the U.S. economy
will not come to a screeching halt and usher
in a recession on January 2. Nor are the
leading indicators declaring doom for 2013.
Let’s consider some brighter news.
We see the U.S. economy improving over
the next four to five quarters, although
not at a pace that will make one break out
the bubbly. U.S. Industrial Production, the
manufacturing engine of this economy,
is rising and posted a gain of 4. 1 percent
compared to the same 12-month period
last year. Nondefense Capital Goods
New Orders, an indicator of business-to-business activity, is 7. 8 percent better than
one year ago. Businesses and consumers
continue to reduce exposure to debt, and
borrowing rates are as stimulative as they
can be. Annual Retail Sales (excluding automobiles, inflation adjusted) rose 2. 4 percent
above the year earlier, with growth evident
in most sectors. Foot traffic in June was
Just for Suppliers
Don’t miss a more detailed discussion
of the short- and long-term economy
from Dr. Jeff Dietrich when he keynotes
A.R.E.’s Industry Summit, November 9,
at the Arizona Biltmore in Phoenix.
More information online at
Here are recommendations for supplier
companies—and others in the retail environments industry—based on today’s
conflicting economic signs.
• EXPECT GROWTH in the retail sector to
extend through 2013, but at a mild pace.
We do not see a recession in 2012 or
2013. A likely mild downturn may come
in 2014. Expect retail stores to continue
to adapt to the changing technological
and demographic shifts. Be proactive.
• BORROW at today’s low interest rates
to improve long-term efficiencies and/
or capture new business opportunities.
Don’t wait for the election to solve
• MAINTAIN a healthy balance sheet to
weather unsettled moments.
• IDENTIFY and CLARIFY what sets you
apart as seen through the eyes of your
clients and prospects. Make sure your
sales staff are trained to be “hunters.”
• FOCUS marketing/sales efforts where
unemployment is well below the national
average and incomes are well above
• Given the challenges of new technology,
INNOVATE and INTEGRATE solutions
and designs to meet a changing retail
5. 2 percent higher than in May and a healthy
7 percent over one year ago. Consumers are
engaged and spending, despite the staggering reduction in net worth and high
unemployment. U.S. Automobile Sales,
not an incidental expense, are back to pre-recession levels, with more gains projected
into 2013. The old adage holds—don’t bet
against the American consumer.
Housing Starts are running well above
year-ago levels ( 20. 3 percent), motivated
by record-low interest rates. Housing prices
have stabilized in most regions, with some
(high-end homes/condos) seeing a mild rise.
Commercial Construction rose 16. 9 percent
over the year earlier, with Private Shopping
Mall Construction up a booming 76 percent
above 2011 (granted that is from some deep
lows). Multi-Retail Construction gained
19. 8 percent in the last 12 months. While
new retail construction is sluggish, nearly
40 percent of nonresidential construction
dollars over the last three years have been
for remodeling and retrofitting existing
space. Spending on remodeling is expected
to increase from $29 billion in 2011 to $35
billion this year, with the largest chunk
of those dollars in high-quality malls and
high-end stores. Commercial & Industrial
Loan activity has ascended to the highest
level in 35 months. Increasing commercial
and industrial credit will support capital
expenditures while interest rates are low.
These signs may not point to a thriving
economy, but neither do they point to a
collapsing one. Businesses are much more
stable today than they were in 2008. And
business owners are more measured in
making decisions and better able to adapt
to the barrage of unsettling news.
In the end, the storm that blew through
our lake did not cause any harm or injury.
We didn’t panic. We prepared for a change
in the weather. Next time, we might pay
a little more attention to a few additional
details. Experience, someone said, is what
you get after you need it. That one storm
was a rare experience, as are devastating recessions in the U.S. economy. Most
of the time, we enjoy the sun, the water,
and family fun. In most years since the
1980s, this economy experienced growth
and expansion. Ralph Waldo Emerson
captured the American spirit well when
he wrote; “What is behind us and what
lies before us are tiny matters compared
to what lies within us.”
Dr. Jeff Dietrich is a senior
analyst for the Institute for
Trend Research. ITR’s fore-
casts have appeared in The
Wall Street Journal, New
York Times, USA Today, Business Week,
The Washington Times, and others.