At the end of a year, we may be tempted to look back and reflect on the past. When looking back on 2013, we see a year of steady but mild economic growth and a government shutdown that accomplished nothing except establishing a new low in our opinion of our elected leaders. But we at ITR Economics believe as you do, that leaders look toward the future. Ignore the banter of politicians and headlines and focus on creating opportunity for your business.
The current expansion in the U.S. economy will last until about mid-2014, followed by a slight contraction in the latter half of the year. This outlook is consistent with extant leading indicators, including the current trend in the housing industry. The forecast is also consistent with the initial sales figures related to Christmas and the perceived upcoming weakness in consumer activity. The consumer faces headwinds in the form of higher taxes and higher healthcare costs. Look for a noticeable slowing in job growth to signal that we are on track with our forecast for the second half of 2014.
Housing construction, which posted strong growth over the last year, has begun to slow quite noticeably. Higher mortgage rates and higher home prices have pushed the housing affordability index into an overall declining trend during the past eight months. Expect a decline in new home starts nationally in the second half of 2014. Home improvement construction is expected to feel some pain in the same time period.
Nonresidential construction will provide readers with increased opportunities in 2014 as the dollars spent are expected to grow, albeit at a mild pace in comparison with 2013. Office construction will be driven by data centers, and the need to store data in the cloud, while school and hospital construction will pick up following years of decline. So too will construction of factories, led by companies such as Apple Inc., bringing manufacturing jobs back to the U.S. In addition, shale gas production will continue to fuel business expansion in the U.S. from both domestic and foreign firms.
The media and many (if not most) talking heads will be providing negative input into the public consciousness in the early stages of 2014. The sources will vary, but they will undoubtedly include talk of another government shutdown related to the looming debt ceiling and acrimonious budget talks. Dwelling on the negative input, combined with a softer 2014, will lead some decision makers to a too-conservative stance. Use the coming year to strengthen your sales team and procedures to maximize both customer satisfaction and sales profit per transaction. This will require the expenditure of funds and time for upgrading or enhancing existing skill sets. We would suggest that you also use 2014 to start the search for key people who will help you grow in a busier 2015.