Now is the time to start preparing for 2016, according to Alan and Brian Beaulieu from ITR Economics. The indicators that ITR tracks say that the 2016 economy in the U.S. will grow faster than 2015. While the economy in the back half of 2015 will slow, it will not be negative. According to the Beaulieus, 65% of people polled falsely believe that we are in a recession, so they’re not planning correctly for a growing environment.
Good days ahead
Good days are ahead for the U.S. economy. Historically, ITR forecasts have an accuracy rate higher than 94%. The reasons ITR is expecting a strong 2016 include positive economic indicators, rising employment, relative global calmness, rising retail sales, increased lending from banks, improving non-residential construction, and continued deficit spending (no fear of austerity).
ITR is forecasting growth until 2018 or 2019. According to their historical tracking, we realize a recession roughly every 10 years. But the Beaulieus believe the U.S. is in a better position to handle a recession that any other country. Why? There are three key factors to long-term economic stability. Population growth, natural resources, and infrastructure are all critical to any nation. While the U.S. population continues to grow, supplying generations of contributors, it is our natural resources and existing infrastructure that will allow the U.S. to better handle periods of inflation.
The U.S. is currently responsible for 22.5% of the world GDP. The next largest producers are China at 13.4% and Japan at 6.2%. The overall global GDP is outpacing the consumption of oil and, now that the U.S. is contributing to the surplus of oil (thanks to our natural resources), it is unlikely that we will see oil prices where they were a few years ago.
Opportunity areas in retail construction are with the luxury brands, dollar stores, and warehouses. … Retail construction trends continue to be smaller footprints in urban settings.
The construction industry looks positive in 2016. We have been experiencing recession hangover, where decisions to start projects come a bit slower than prerecession practices. The construction industry has been growing around 3.5% to 4.5% this year. 2016 looks more positive with nonresidential growth forecast at 6.3%. Indicators such as the Architectural Billings Index and office building starts are at double-digit growth.
The growth in retail construction will slow down from 10% the rest of 2015, but will pick back up again in 2016. Opportunity areas in retail construction are with the luxury brands, dollar stores, and warehouses. Due to the online shopping trend, warehouse construction is up 52.3% this year. Retail construction trends continue to be smaller footprints in urban settings.
U.S. manufacturing also looks promising in 2016. North America is leading the way U.S. up 3.8% and Mexico up 3.7% this year. The main reasons for this include near sourcing (customer orders coming back to the U.S.), improved technology, leveling of capital vs. labor costs, cheaper energy costs, and improved production efficiencies. Another bright spot for manufacturing is employment, which has been trending down historically but is now turning positive again. There are 12.3 million workers in the manufacturing industry.
Potential headwinds to manufacturing are trade exchange rates and the import-export imbalance. The strong dollar makes our products too expensive to compete overseas.
Keeping in mind that the Beaulieus have a plus 94% accuracy history with their forecasting and they see 2016 as a growth year, how can you take advantage of this information? Here are a few recommendations:
Marketing: Invest in customer market research to reduce price sensitivity, and increase your investment on the most effective advertising.
Human resources: Make sure your training and retention programs are top-notch, and focus hiring on salespeople and leaders.
Finance: Expand credit offerings to garner market share and lock in costs toward the end of 2015. And finally, drive efficiencies with technology.