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Distributor's Link Magazine Fall 2023 / Vol 46 No 4


40 THE DISTRIBUTOR’S LINK GLOBALFASTENERNEWS.COM by JOHN WOLZ EDITOR ECONOMIST TELLS NFDA: POST-COVID LET-DOWN APPEARS TO BE SOFT LANDING Yes, the U.S. economy is headed toward a recession, but “we can have a soft landing,” economist Patrick Lucas of ACI Economics told the National Fastener Distributors Association. One might expect a crash upon coming down from the “sugar rush” of massive government Covid spending, but the U.S. economy is going to be “more like a nap,” Lucas predicted. The U.S. economy is “headed toward normalization.” Growth will be slow this year and “negative next year,” Lucas forecast. Expect margins to erode. To prepare for a slower economy, Lucas advised NFDA members at the association’s 2023 annual meeting to “lose the losers” among product lines. “Scale back,” he said. “Know what is driving your business.” Where are backlogs? Where are possible order cancellations? Budget for lower inventory. “Focus on ‘buy low, sell high’,” Lucas advised. Grow your share of the market and emphasize competitive advantages. Also “focus on talent retention” for growth in 2025. Inflation is “starting to ease,” ITR finds. “Federal Reserve tools take a long time to work,” Lucas explained. Producer prices are “flattening out” and steel scrap prices are declining, he noted. The automotive industry is still recovering from supply chain problems which slowed production post-Covid, Lucas noted. There are “favorable trends in utilities,” he pointed out. However, new machinery orders will be down 3% in 2024, he predicted. Economists are watching Federal Reserve interest rate actions for clues. “Higher interest rates drag down the economy,” Lucas said. There is “angst” among those who went through the “Great Recession of 2008,” but Lucas termed the next “more mild.” ITR has pushed-back its forecast of a full-fledged depression from the late 2020s to a 2030 / 2036 period. Contributing factors include demographics, health care costs of an aging population, entitlements, inflation and the U.S. national debt. Lucas advised having cash available at the end of the decade. The U.S. totals 25.4% of the world GDP, followed by China at 18.1%; Japan 4.2% and Germany 4.1% Countries with higher economic potential include India and Mexico, which have younger populations, Lucas said. Factors boosting the U.S. include a strong infrastructure and political stability. ¤ Incomes “are doing ‘okay’ now,” ITR finds. Credit card debt is low. Company delinquencies and bankruptcies are low. Liquid assets are up. ¤ China is “becoming more of a problem going forward with mounting risks.” Conversely, Russia is “hallowed out,” Lucas ¤ U.S. nationalism presents “new business opportunities” with ‘Made in America’ products. ¤ Best chance to get loans when banks are tightening credit? Loans for investments in efficiency, Lucas said. vThe labor market traditionally lags the economy. Today unemployment is the lowest in 21 years. The U.S. Infrastructure law is ramping up spending on roads and bridges, railroads, public transit, road safety PODs. The law will buffer other declines. BUSINESS FOCUS ARTICLE GLOBALFASTENERNEWS.COM


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