Friday, April 18, 2014

The Good, The Bad & The Ugly #Manufacturing

I thought I’d borrow the title of a great movie and talk about a couple of presentations I heard that discussed the state of our economy and its future. As the title suggests, there is good, there is bad and boy, oh boy, is there ugly.

The Good:

Contrary to what you may have heard, the economy is improving. The Federal Reserve Board is predicting that this trend will continue for the next several years and that our economy has turned the corner in the
recovery from the “great recession” of 2008-09. Energy production, especially natural gas drilling, will help our economy by keeping costs low and providing jobs. New home construction is up and will exceed our population growth and takes into account the natural loss of older homes or those destroyed or damaged beyond repair.

The Bad:

While our economy is improving, it is not improving at a rapid pace and continues to lack the growth that is needed to really get all our unemployed people back to work. In addition, our growth, while weak, is better than that of the rest of the world. Not a good trend. The energy production boom will only be sustained if oil stays at a price above about $55-$60 per barrel (now at $101/barrel). Since there are old laws on the books that prohibit the export of raw oil products, we will continue to need to refine any oil that is produced here in order to export its byproducts.

In the next five to fifteen years, a significant portion of our electrical production capacity (both nuclear and coal) will be going offline due to the age of the plants. In order to replace this capacity, we’ll either have to cover an area the size of Oklahoma in solar panels or build more plants that to some, are currently environmentally unacceptable. I don’t know about you, but I like living in a lighted home with A/C, especially here in Arizona.

The Ugly:

There are more than a few bumps in the road ahead especially in the geopolitical arena. China’s economy is struggling and how their government deals with their large decrease in growth and excess capacity is still in question. Situations in Syria, Ukraine, and Iran and economic issues in the EU are percolating, with some being close to crisis status. Except for the Ukraine matter, we will probably not be directly involved but our economic system could be affected by the others in a dramatic fashion.

Unfortunately, Clint Eastwood will not be coming to fix any of the matters mentioned. However, and in the meantime, we can hope for and work toward a successful and more productive recovery in the United States that will have a direct effect on the rest of the world. The quote about rising tides lifting all boats applies here and we should be thinking about ways to help our economy instead of wallowing in despair by watching and listening to the naysayers.

Have you felt a shift in your manufacturing business? Are you wondering how you can "ride the tide"? If you're looking at improvements in processes for your manufacturing company, give our office a call or drop us an email.

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