CHICAGO Aluminum companies should use a slow 2014 to upgrade, expand and make new hires to gear up for boom times in the following years, one economist said at a recent Metal Service Center Institute (MSCI) aluminum products division conference in Palm Beach, Fla.
Next year will be "off" compared with 2013 as demand slackens from the middle of 2014 into the first quarter of 2015, said Alan Beaulieu, president of the Institute for Trend Research, a Boscawen, N.H.-based consultancy.
"If you project your growth is going to be the same as it was 2013, youre going to be wrong," he said.
North America wont fall into a recession, but Brazil and Europe will, Beaulieu said. "The world will soften ... and it will impact (the aluminum) industry," he said.
Beaulieus view contrasted with several aluminum industry executives who voice optimisim about 2014 (amm.com, Oct. 28).
While the automobile industry is seeing solid growth in 2013 compared with 2012, it wont be immune to the slowdown, Beaulieu said, predicting automobile production in 2014 will be 6.3 percent below this years levels.
Industries as diverse as metalworking machinery, consumer durables, truck trailers and medical equipment are also expected to slow in 2014, Beaulieu said. The only exception is aerospace, which is expected to grow 7.8 percent in 2014, he said. "Orders are in. And the downturn doesnt look like it will be significant enough to cause a large number of cancellations."
Once the 2014 slowdown subsides, the U.S. economy is poised for a bull run from 2015 into the first half of 2018, Beaulieu said.
That period will benefit from energy independence in the United States resulting from the shale oil and gas boom, the expansion of the Panama Canalwhich will create jobs on the U.S. East Coastand the U.S. Federal Reserve continuing loose monetary policies aimed at bolstering growth, Beaulieu said.
In addition, U.S. consumers have deleveraged and are spending, U.S. manufacturing is again globally competitive and "near-sourcing" jobs, and a free trade agreement between Canada and the European Union (amm.com, Oct. 22) should also spur growth in the future, he said.
But bank lending is slowing in part because of increased regulation resulting from policies such as the Dodd-Frank Wall Street Reform and Consumer Protection Act at the same time interest rates are expected to rise, Beaulieu said. "You need to go out there and borrow money nowthis yearand not wait until 2014," he said. Another problem will be a lack of skilled labor, Beaulieu said, predicting that "bidding wars" for qualified workers will lead to wage inflation.
"You need to be using 2014, an off year, to get ready for whats coming on the other side," Beaulieu said. That might mean expanding, acquiring key staff, de-bottlenecking or making acquisitions, he said. "Whatever your constraint is ... fix it in 2014 because you are not going to have time in 15, 16, 17 because of all the right things going on in this country."
Still, Beaulieu cautioned that a "significant downturn" is coming in 2019 as current loose monetary policies return to haunt the economy in the long-term. "Were going to have to pay a price for that. Massive amounts of currency is being created by central banks around the world, and its the fuel that is going to touch off inflation," he said, predicting an inflationary business environment not seen since the 1970s.