THE ECONOMY: The Fire Sprinkler Industry Roundtable December 2009
The last issue of Grass Roots, which was sent electronically to most of our readership, contained a “blog” link which as we write this issue was relatively quiet. Perhaps everyone agreed with what was said regarding the present state of the sprinkler economy. Let’s see what this month brings.
While sprinkler device shipments and installation hours continue to trend downward it appears that the rate of decline is not as dramatic as it was during the last several months. Hopefully, this is a good sign that we are at the bottom of the recessionary cycle. In fact, one report that surfaced in mid-November suggests strong economic growth and a huge stock market rally in 2010. The reasoning behind this very “bullish” prediction makes sense:
- Pent up demand: Businesses at every level have delayed capital expenditures ranging from new equipment to expansion. This will begin to show “signs of life” in early 2010.
- The same is true of the consumer whose “belt tightening” has resulted in debt reduction. The prediction is they will begin to spend as well.
- Financial institutions which at every level have improved their balance sheets will begin lending at higher levels.
The key of course is still consumer spending. This is the engine that will start us back to the road of economic recovery. Companies at every level have been “running lean and mean” will see a dramatic increase in earnings even with a modest uptick in consumer spending. This in turn will have a very positive effect on the stock market, particularly equities. Some investment managers are predicting a shift in portfolio allocations from fixed income to equities beginning early next year. Traditionally the last quarter (Oct-Dec) has seen poor performance in the financial markets, yet this year significant gains have been realized “bucking” traditional trends.
I’m hopeful that in early 2010 the “patient” (the sprinkler economy) will be off life support and begin the road to recovery…we would like to hear from our readers.
I am hopeful as well that we are at the “bottom” and that 2010 will see improvement. I am concerned however about the potential for a “double dip.” My concerns stem from the risk of seeing extraodinary high interests rates (remember 1980 with 21% prime rates and 16% home mortgages). The huge deficit that the government is creating will result in higher interest rates and inflation as the feds try to finance the debt. If interest rates and inflation go anywhere near what we experienced in the late 1970’s and early 1980’s I am concerned that it will kill the recovery. I know that our firm plans to be very cautious about adding overhead and making any substantial capital investment until we feel that any recovery is stustainable and not simply a short term blip. I am very interested in what others are seeing in their markets concerning the overall economy and specifically for our great industry.
How much recovery can there really be?
The entire country operated on credit for the past 20 years.
With the loss of our manufacturing facilities, there will be less demand for our product.
The manufacturers are this this the single family dwelling requirements, which will undoubtedly save lives. However, this work will be performed by plumbing contractors using combination systems.
The sprinkler contractors will be competing over the Wal-Mart store being built.
NUCOR CEO was on MSNBC the other night, telling Cramer that the country will not recover until the trade deficit is addressed with more than lip service. He also wrote a guest editorial in the Wall Street Journal asserting the same view.
The obvious short term growth is government. Until the trade deficit is addressed, the long term is bleak.
Didn’t Harry Figgie write a book about this collapse?