Economy Maintains Momentum

June 1, 2006
Make sure you have the right employees in place to meet increased demand for goods and services in the coming year.

The momentum for the non-high technology sector of the economy is holding up well, albeit at a slightly slower rate of growth than is true of total U.S. industrial production (2.2 percent growth rate as compared to 3.2 percent). Leading indicators suggest that a faster rate of growth lies ahead for the second half of 2006, with more good news in store for 2007. Readers working in the realm of High-Technology Industries Production (3341, 3342, 334412-9 in the federal government’s North American Industry Classification System, or NAICS) are enjoying a year-over-year growth rate of 22.3 percent, with more double-digit growth ahead.

Phase B Management Objectives apply whether you are participating in non-High Tech or in High-Tech. Make sure you have the right employees in place to meet increased demand for goods and services in the coming year. Training and judicious hiring should be high on your list of things to do. Be careful with your hiring if you are in the non-High Tech realm, as you may be looking at layoffs two years from now. You should also review your production and delivery systems with an eye to maximizing efficiences. Elongated delivery times will end up costing you customers in this fast-paced environment.

Consumers carry load

Retail Sales for the last 12 months are running at a healthy 5.2 percent above this time last year. The consumer is clearly carrying the U.S. economy forward despite relatively high energy costs. The recent moderation in oil prices has not made it to the pump yet, but if and when price declines do materialize, it will only add to our upbeat outlook for the rest of this year.

March recorded the second highest monthly total for Electrical Equipment New Orders since June 2000. There is still a lot of rise left to go in this marketplace. Electrical Equipment New Orders encompasses NAICS 33531: power, distribution and specialty transformers; electric motors, generators and motor generator sets; switchgear and switchboard apparatus; relays and industrial controls. That, along with record highs in the three- and 12-month moving totals (3MMT and 12MMT), suggests that there is still a charge left in Electrical Equipment New Orders that will extend through 2006.

The New Orders quarterly production trend is a healthy 16.4 percent higher than last year; however, the seasonal rise to date is weaker than the two previous years, but within acceptable parameters. The annual growth rate for the 12-month moving total is 16.7 percent, which is the fastest growth rate in 21 years. Look for the growth rate to slow as we move through the latter half of this year.

The Farm Machinery Production for the last 12 months is 7.5 percent above last year and rising, but the rate of ascent is expected to slow in the near term. External factors consistent with our outlook can be found in that there have been two consecutive years of record harvests and increased surpluses that have flattened grain commodity prices. More importantly, farm income is expected to be lower, largely due to increased costs of operation. Costs for fuels alone are up 30 percent from last year, and fertilizer costs are up 16.2 percent. Prices received by farmers, including meat animals and dairy, have declined 0.9 percent through the same period.

Alan Beaulieu, [email protected], is Senior Analyst and an economist with the Institute for Trend Research, in Concord, N.H

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