Muted. Modest. Mild. So-so.
These are all words that were used frequently throughout this week’s Industry & Economic Outlook Conference (IEOC), presented by The National Fluid Power Association in Wheeling, Ill. Most economists echoed their thoughts from last year, saying the country, and the fluid power market in particular, is on track to round out the rest of 2015 at a slow pace and experience moderate growth rates of about 2 to 2.5% in the coming year.
Each year, the IEOC features four keynote presenters, who all give their predictions based on the data they review every day as economists. Returning this year were NFPA favorites Alan Beaulieu, of ITR Economics; John Walker, of Oxford Economics; Eli Lustgarten, of ESL Consultants; and Jim Meil, of ACT Research.
With most traditional fluid power markets down and not expected to see a major comeback for several years, it would seem like a lot of gloom and doom. As all four indicated, agriculture machinery, mining machinery and industrial machinery will not see much growth in the coming years as those markets continue to pull back. But I think we can all see a silver lining as lower energy prices, higher employment and non-durable goods help to pick up the slack.
Beaulieu kicked things off, highlighting that his previous forecasts have been extremely accurate, and that he expects things to be still on track for 2016. One of the key statements he made, and which I agree wholeheartedly with, is that nothing is as bad as the press makes it out to be. As he forecast last year, he expects 2016 and 2017 to be up, with a mild recession coming in 2019.
Oxford was, as usual, fairly optimistic. While he said he sees the short-term forecast as “deeply troubling,” he expects mid-term growth rates of between 4 and 5%. He said the U.S. economy is relatively good, with a weaker dollar hurting exporters but really helping to boost consumer spending power.
Lustgarten honed in on the U.S, saying it was an oasis in what is to be modest global growth, as things have started picking up and, like Beaulieu said, will continue for the next couple of years. As each one pointed out, the U.S. is on stable ground while other world powers, such as China, Russia, and Europe, struggle.
However, all four agree that durable goods, particularly those filled heavily with fluid power components, will lag behind more consumer-driven growth. But as energy prices, including oil, natural gas and electricity, continue to stay low, said Meil, we will really see a pick-up in activity as we start to “see the plus side in the energy price shock.”
One surprise bonus of this energy price shock was that the average four-person family could see an extra $1,000 back in their pockets. Imagine how much money that is for businesses that are heavy energy users. So as they all said, it’s time we all start to take advantage of the slowly strengthening economy now, to increase hiring, make capital expenditures and encourage consumer spending, so that when the mild recession does hit in 2019, we’re all in a good place in our businesses and homes.
