• SWAT Update ... Look for a major initiative in seeking legislation to amend the IRS Code of 1986 permitting a building owner to expense rather than capitalize the cost of a fire sprinkler installation. Jim Dalton NFSA's Director of Public Fire protection will coordinate this effort. 

• Check schedule for upcoming online seminars. 
• New 24/7 online training programs available at www.nfsaacademy.org

Fire Sprinkler Industry Economic Outlook 

In looking back at the previous economic roundtable discussions from the Contractors Council, business for our Industry should be very strong. Our Manufacturers and some Suppliers, however, are seeing a slowdown in activity which tracks more closely with what we have been suggesting to the Board of Directors during the past 15 months. 

I believe that we are now in a recessionary cycle which will impact the sprinkler business for the next year; while backlogs remain solid, new work is slowing significantly. In fact, we are receiving reports that several large projects are being shelved for lack of financing. Contractors should not believe all is well based solely on backlogs. It may be important to reflect on why this is taking place and how long it will last. 

A Look at Recent Economic History 

This present recessionary cycle is being driven by the implosion of debt, while the recession that began in 2000 was driven largely by a collapse of equity markets. As you will see, this, in my view, is an extremely important difference. If you recall, the recession of 2000 was led by a significant downward spiral of the NASDAQ as the “dotcoms” went belly up. While it also involved debt – to the tune of $1 trillion worth of borrowing by the fiber optic builders like Global Crossing – it wasn’t consumer debt. As the value of their stock plummeted, these tech giants ultimately went bankrupt when they couldn’t repay their loans as their customers, the silicone valley “dotcomers,” went under. When the dust finally settled, individual investors lost millions in the market, yet most still had homes, jobs, and cars. The beginning of the new millennium saw a surplus in the Federal Budget. 

With an improved federal deficit, taxes were cut and interest rates lowered to unprecedented levels. As a result, lower interest rates temporarily revived the economy.  Low interest rates made it very attractive for consumers to buy houses. Unfortunately, almost 50 percent of the people who took advantage of the $1.3 trillion in sub prime mortgages could not verify their income; very scary, but true. Foreclosures will now affect 2,000,000 families by 2009, which in turn is putting further downward pressure on housing prices. This is leading to a very ugly spiral as consumers, unable to borrow against their homes to pay their bills, are defaulting on the $2.5 trillion worth of debt in the form of credit cards, auto loans, student loans etc. Coupled with this, the wars in the Middle East resulted in a ballooning of the federal deficit to almost $10 trillion.