• Free for qualified executives and consultants to industry

  • Receive quarterly issues of Area Development Magazine and special market report and directory issues


Economic Forecast 2013: Overcast with Clearing Skies

Consumers have trimmed their debt loads and large corporations are creating treasure chests of cash to invest when market uncertainties are resolved; businesses should take steps now to position themselves for a revival of activity.

November 2012
(page 2 of 2)
What Will Drive Growth?
Given the distance still to go for housing, it’s apparent that the industry will not play its traditional role of stimulating an economic rebound. “We’re not going to see housing lead the way out of recession,” says Walter Simson, principal of Chatham, N.J.-based Ventor Consulting. “That’s because banks were hurt too badly [by the financial meltdown of 2008] and housing prices were in a bubble. So gains will need to come from other areas.”

One such area, says Simson, is exports. “Over the last several years the dollar-to-euro exchange rate has stayed in a narrow band. That means Europeans can purchase American goods without too much punishment.”

Another promising area is onshore production. “I am seeing some companies pull their production lines back into this country from China and other countries,” says Simson. “That’s especially so with high-value and mission-critical items. The reason is that foreign operations can make companies vulnerable from a logistics standpoint.”

Companies are also concerned about losing control of their intellectual property when operating overseas. Finally, there is a leveling of the wage discrepancy: Wages in China have been steadily increasing over the past few years.

Sparking a Rebound
Will all of these factors come together to spark a rebound? Simson is optimistic. “We will see a rebound because bank capital is getting stronger every quarter and household debt is being reduced,” he says. “This is setting the stage for improvement.” Positive vibes are also coming from a renewed interest in top talent. “The market for financial professionals, controllers, and accounting managers has rebounded sharply,” says Simson. “The mood in the financial corner of the executive suite is much better. It’s an early sign of good news that companies are interested in those skills again.”

Other observers also see some sunlight filtering through the dark economic clouds. By the fall of 2013 Moody’s expects major market uncertainties to be resolved as law makers bridge their differences, raise the Treasury debt ceiling, and agree to longer-term tax and spending policies. “Combined with the Fed’s aggressive actions and a more stable Europe, all of this will ease businesses’ fears,” says Koropeckyj. “Growth will accelerate and unemployment will begin to fall.”

If those are optimistic words, Simson points to another easily overlooked factor: While the economy’s growth is disappointing, it is also continuous. The expected 2.4 percent GDP boost in 2013 is, after all, not far off the historic norm. The problem, says Simson, is that we became too accustomed to the rapid escalation of the flush years. “We took the candy high of the real estate and financial bubble and thought such rapid growth was normal.”

Maybe an old proverb applies today: Patience will be rewarded. “The current growth rate is not enough to make you jump up and down, but it keeps people off the streets,” says Simson. “I see 2013 as good as 2012, and 2014 getting stronger.”
Article Discussion

Follow Area Development