FMA talks ways to end recession
Several things have to happen for the U.S. economy to rebound, says an economist from the Fabricators and Manufacturers Association International.
Four trends have to go manufacturing's way if the industry is to rebound this year.
That's the opinion of an economic analyst for the Fabricators and Manufacturers Association International.
“Many factors come into play when predicting what must take place to spur growth, and one could go slightly balmy evaluating them all,” said Chris Kuehl, Ph.D.. “However, four areas do stand out as the best barometers – developments in the financial sector, consumer confidence, exports and commodity prices.”
Kuehl said the financial sector needs to be more stable.
“This has been the goal of the Federal Reserve and Treasury for months, but there has been scant progress,” he said. “These efforts are based on monetary policy, so they do take awhile to bear fruit. We should start to see marked improvement by end of the first quarter, including in the banking sector, such as some dramatic reduction in the London Interbank rates, more movement in the money markets and banks more willing to do business with one another.”
Lower interest rates and more market liquidity should start to help, Kuehl said.
Consumer confidence must improve, he added.
"For the moment, the price situation is very positive as commodity prices have tumbled to record lows,” he said. “This should continue in the short term, with even food prices beginning to decline. But the job front is different. Major layoffs that have been announced almost daily make consumers extremely nervous. If major job losses are behind us, people can catch their breath and assess. Then, if job prospects begin to improve, the consumer mood will quickly shift.”
Th export market needs to improve, the economist said.
“The dollar’s current strength is likely short lived, though, and that will promote U.S. trade,” he said. “More demand also is required, and can happen if the Asian states and India succeed at stimulating their economies.”
Finally, commodity prices must stay down.
“This is currently the best news available for the manufacturing community as prices for every industrial input have fallen for the past few months,” Kuehl said. “Oil is down below $50 a barrel, and few see it recovering much in the next several months. Steel is down, and so are the other metals, everything from copper to nickel to aluminum.
“Although, in general, it is likely that the first quarter of 2009 will be in negative territory, and the second quarter is something of a toss up, there is good news soon thereafter,” he added. “There is a consensus the third quarter will show some significant improvement with the fourth quarter also likely to end up positive.”
Four trends have to go manufacturing's way if the industry is to rebound this year.
That's the opinion of an economic analyst for the Fabricators and Manufacturers Association International.
“Many factors come into play when predicting what must take place to spur growth, and one could go slightly balmy evaluating them all,” said Chris Kuehl, Ph.D.. “However, four areas do stand out as the best barometers – developments in the financial sector, consumer confidence, exports and commodity prices.”
Kuehl said the financial sector needs to be more stable.
“This has been the goal of the Federal Reserve and Treasury for months, but there has been scant progress,” he said. “These efforts are based on monetary policy, so they do take awhile to bear fruit. We should start to see marked improvement by end of the first quarter, including in the banking sector, such as some dramatic reduction in the London Interbank rates, more movement in the money markets and banks more willing to do business with one another.”
Lower interest rates and more market liquidity should start to help, Kuehl said.
Consumer confidence must improve, he added.
"For the moment, the price situation is very positive as commodity prices have tumbled to record lows,” he said. “This should continue in the short term, with even food prices beginning to decline. But the job front is different. Major layoffs that have been announced almost daily make consumers extremely nervous. If major job losses are behind us, people can catch their breath and assess. Then, if job prospects begin to improve, the consumer mood will quickly shift.”
Th export market needs to improve, the economist said.
“The dollar’s current strength is likely short lived, though, and that will promote U.S. trade,” he said. “More demand also is required, and can happen if the Asian states and India succeed at stimulating their economies.”
Finally, commodity prices must stay down.
“This is currently the best news available for the manufacturing community as prices for every industrial input have fallen for the past few months,” Kuehl said. “Oil is down below $50 a barrel, and few see it recovering much in the next several months. Steel is down, and so are the other metals, everything from copper to nickel to aluminum.
“Although, in general, it is likely that the first quarter of 2009 will be in negative territory, and the second quarter is something of a toss up, there is good news soon thereafter,” he added. “There is a consensus the third quarter will show some significant improvement with the fourth quarter also likely to end up positive.”
Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!
