Presidents Message - Late Winter for the Economy

Late Winter for the Economy

by Benjamin Rand

This is a tough time of year in WNY. The worst of winter is finally behind us. We start seeing more sunshine, more grass and more temperature readings above 40, even above 50. But as any grizzled WNYer can tell you, we still have plenty of sub-zero temperatures and late snow storms ahead of us, especially as the lakes thaw.

In my opinion, this is the worst part of our year. It's actually easier from December through February, when there is no hope. We can only hunker down and take what winter gives us. But knowing that makes us resolute and helps us to bear up. Now, as fleeting glimpses of spring begin to appear, we allow ourselves to hope and that makes it all the harder to bear the cold snaps and snow that we still have to weather.

In many respects, this is exactly our economic situation now.  The worst of the downturn is clearly behind us. Most critical economic measures have improved significantly from the nadir of 2009. GDP, new manufacturing orders, production, exports and personal spending were all up through year end 2010.

Even unemployment has begun to improve, dropping below 9% in February for the first time in almost 2 years. Certain sectors of the economy have been going strong with performance measures approaching pre-recession levels. We can begin to imagine, even if it is not here yet, a future summer for the economy. Most prognosticators expect continued improvement through 2011 followed by "good" years in 2012 and 2013.

But there are still plenty of squalls and cold snaps to overcome. At the moment, worries about federal and state government deficits, Arab unrest, spiking oil prices and inflation are generating uncertainty nationwide. In WNY, manufacturing activity turned south in February. The ISM Manufacturing Index for WNY fell to 45.6, the lowest reading in a year. Manufacturing job growth has been lower than the national level. One business owner put it well, “this is just like a real roller coaster ride. I feel most queasy at the end.” So what are business owners and presidents to do?

If you agree that the economy is in recovery and summer is coming, there are a number of actions that you can consider as a manufacturing company owner or president. These actions fall into two broad categories: Sales and capacity.

Sales

• Hire sales staff or bring on distributors/reps. If the economy improves, you need to be ready to capture that demand.
• Increase advertising and promotions. In an ideal world, you maintained your visibility through the downturn. Don't relax now! Get the word out. Make it easy for buyers to find you and understand what you offer.
• Be prepared to increase your prices. Shocking, I know, after years of holding the line. But when demand returns, you will need to consider this. How else will you cover your increasing raw material costs?

Capacity

• Make process improvements. This will increase your capacity, and just as importantly it will reduce lead times and improve customer service.
• Invest in capital equipment, if needed. Capital equipment placed in service by year end 2011 is eligible for 100% bonus depreciation.
• Make selective hires. You will need good people to take advantage of the improving economy. The quality resources that were available early last year are already dwindling. Frankly, you may already be too late in WNY.

In a few months, memories of this winter will have faded away, replaced by spring blooms. Let's hope the same is true of our economic challenges.