FABTECH attendees who were willing to get to McCormick Place in the morning hours on Nov. 13 were rewarded for their early-bird tendencies. At the annual Forecast Breakfast sponsored by The Fabricator, Huntington National Bank Senior Economist George Mokrzan made the prospect of looking at the tantalizing new capital equipment upstairs much more palatable.
“The bottom line: the fundamentals of the U.S. economy are very strong,” Mokrzan said. “We will see a continuation of economic growth, be it at a moderate pace. But given the fears of recession that have been offered this year, that’s a significant statement.”
It was indeed. Mokrzan’s take on 2020 was decidedly upbeat, particularly when viewed through the lens of the American consumer. “The fundamentals of the U.S. consumer are probably the best they’ve been in decade. We’re fortunate to have a consumer that is active, that is risk taking and likely will continue to spend.”
Among the positive factors for the consumer are the incredibly tight labor market, coupled with growing wages. Those two items will continue to drive spending.
Of course, the two legs of the domestic economy have been running on separate, not parallel tracks. The industrial side has not enjoyed the same level of growth as the consumer segment. According to the Institute for Supply Management’s PMI report, the manufacturing economy has been contracting for the past three months, with all the metals-intensive segments experiencing contraction in October.
“The weak spot has been goods-related markets. It’s tied to the international economy, which has had some downward pressure,” Mokrzan said. “Ag was probably the hardest hit sector. They were hit by the tariffs and trade disputes the most.”
But even there, positive signs exist. Businesses are sitting on a lot of money, ready to be spent when ready. While a lot of the extra cash that companies kept through the Tax Reform Act of 2017 went into stock buybacks, most is still sitting on balance sheets. “The potential for business spending is significant.”
And for those without strong balance sheets, the recent cuts in interest rates should spur a willingness to borrow. “Monetary policy looks as if it’s going to have positive growth on economic growth next year.”
Finally, Mokrzan believes the trade disputes of the past two years will de-escalate in 2020, particularly with China.
While there are risks, including low growth internationally and some debt issues, Mokrzan believes the “U.S. is still one of the best places in the world to do business. You have the power to drive your business, to make a lot of decisions on labor, cash flow, marketing, whatever you want to do.”
If Mokrzan’s expectations for 2020 hold true, it will be a nice gift to the metals supply chain for the holidays.