May 2017
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Beaulieu: These are the Good Old Days

By Tim Triplett
 
The U.S. economy is in much better shape than most people believe, and not because of a so-called Trump Bump. “If it was politically driven it could stall, but the fundamentals are real,” said economist Alan Beaulieu of ITR Economics, delivering positive news to members of the Copper and Brass Servicenter Association at the group’s annual meeting last month in Tucson. “Your part of the economy will do much better in the second half of 2017 and into 2018,” he assured the crowd. Copper shipments historically track very closely with GDP and industrial production, which are strong and getting stronger.

Economic conditions in the United States promise improved demand for steel and aluminum, as well as copper, as the year progresses. Consumer spending, which represents over two-thirds of the economy, is robust. Employment and wages are rising. Interest rates remain favorable, and banks are lending. Housing starts are growing. Commodity prices are seeing some upside pressure. Energy is cheap and abundant. “The U.S. can be energy independent anytime it wants. We are no longer beholden to the rest of the world,” Beaulieu said.

Manufacturing output is on the upswing. Automotive production is leveling off, but at a high rate. Foreign direct investment is a major advantage. “Money is pouring into this country. Companies around the world are voting with their checkbooks and saying the place to be is America,” he added.

No doubt, there are ongoing concerns, many of them political in nature. For one, President Trump’s proposal to repeal the North American Free Trade Agreement. “NAFTA might be repealed, but it would just lead to new agreements with Canada and Mexico. I think Trump is a realist. To provide a barrier to goods moving between Mexico and the U.S. is not in our best interest,” Beaulieu said.

Similarly, he hopes talk of a border adjustment tax on goods entering the United States will fade. He called a BAT “an abomination that would cause inflation, unemployment and unfair trade.” In fact, he added, protectionist policies never work in the long run. “Some companies win for a short time, but others lose. And when the barriers come down—and they always do—the protected companies have become inefficient. Fair trade is essential, but government should not be picking winners and losers.”

ITR Economics forecasts positive business conditions persisting well into 2018, followed by a mild recession in 2019. “Nothing being talked about right now is likely to change that outlook,” Beaulieu said.

Meanwhile, he warned, don’t allow the contentious political atmosphere to breed a sense of pessimism that becomes self-defeating for your organization. “In the future, when you look back, these will be the good old days,” he said. “Pass that message on to the people who work for you. It can help adjust their expectations.”

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Wednesday, October 18, 2017