The Economic Roundtable –Are There Still Economic Headwinds?
We, like many of you, are in the process of assembling our Budget for 2011. Naturally, we need to provide our Finance Committee with our forecast for the balance of 2010 based on 8 months actual revenue and expense and our budget for 2011. All indications suggest that we may indeed have reached the bottom of the downturn…contractor dues to both NFSA and our Industry Funds appear to have stabilized over the last three months and manufacturers’ sprinkler shipments have shown a slight uptick in every quarter since the beginning of the year. While construction spending is at an all time low, the strength of sprinkler requirements in building codes should not be overlooked. We continue to protect a larger number of buildings from a smaller inventory being erected than ever before in our history. In speaking to contractors from coast to coast and border to border I’m being told that while there is work to bid, the number of bidders on a job make pricing very competitive. Balance sheets at every level remain very strong as we have indicated in previous reports. Organic growth, unfortunately, is not responsible for this strength. Cutbacks and greater productivity within every business is making “cash” the king. In my view, once the consumer begins spending, we may see some investment in capital expenditures. There are still headwinds to overcome but they don’t appear to be as strong as they were 12 months ago. Anyone want to share their views, comment here.
John, I understand that the sprinkler manufacturers are seeing an increase. But where are these sprinklers being installed? Government and healthcare are the the largest growth areas.
Healthcare is basically a branch of government now and has been for 30 years.
Much of this may be the result of the stimulis spending, but that is only a short term boost. Compare the stimulis spending to this: When I run 20 miles on the weekend, I carry small packets of syrup with me. Prior to feeling tired, I drink the syrup to boost my blood sugar level. It keeps me going. Without it, I would become tired and not perform as well.
The stimulis act was a shot of syrup in the economy. It produced some spurts of spending, keeping some contractors happily working. Yet, unlike the marathon runner that has trained hard and built strong leg muscles, lung capacity and endurance…..this stimulis syrup was shot into a sick, dying patient.
A patient that has smoked his whole life, ate fat foods and cant run a mile. That patient is our economy. For 30 years, we have experienced a trade deficit that has not ONCE benefited us. Our country, and neighbors have lived on debt (a first in the history of mankind), and an artificial real estate market that fueled the debt.
After 9/11, the market collapsed (because markets always will adjust themselves), and corporations and individuals began to re-acess their net worth which really didnt add up to much.
They cried to government for help and government, which is always self-serving, gladly poured more money into the economy (for government and healthcare related projects), by selling debt notes to China and other countries.
Eventually, the debts will become due and taxes will need to be raised…causing the economy to retract. The Fed recently announced it will resume buying debt to keep the country afloat for now.
As for the NFSA budget, I think the NFSA should consider hiring a full-time grant writer to get welfare from the government throughout the depression. Do a Cost Benefit Analysis, it may be a worthwhile endeavor.
As for private contracting, profits will remain low and the economy retracted until government incorporates free market principles, like lowering taxes and regulations, and cutting excessive spending.
I do not see any rebound in this economy for at least 10 years.