The Opportunities Of Economic Downturns
By Shawn Zuver, editorial/content director
The U.S. stock market slid a bit more yesterday, January 22, 2008, with the Dow Jones Industrials index off more than 128 points to 11,971 and nearly 16% down from the all-time high of 14,198 that was reached last year.
An even steeper decline—the Dow had slid to 11,634 in early January 22nd trading—was apparently staved off by a remarkable three-quarters of a point cut in the federal funds rate by the U.S. Federal Reserve (the largest cut in nearly 25 years). Today, the market started out the day again with a downward movement. While not always the best true indicator of the U.S. economy, the stock market does reflect the current national attitude.
Despite being a presidential election year when the economy is typically expected to be steady, it seems (based on consumer spending news, flat employment reports, and lackluster corporate earnings outlooks on various fronts) that the U.S. could be dealing with some type of recession. If this is true, there are understandably a couple questions that follow. Would this be a mild or moderate corrective recession that would be short in duration, with an end expected later this year? Or would it be more severe, carrying over until 2009?
Based on the actions of the Federal Reserve yesterday, a long-term recession seems unlikely. In addition to the Fed’s actions, the current economic climate has the full attention of both the Congress—including many members who don’t want to upset voters before their re-election bids in November—and the President who, in his final term, isn’t encumbered by campaign activities. Tax incentives for individuals and businesses are already on the boards, and it seems sure that all ideas will be considered. It's apparent that "all eyes are on the ball" where the economy is concerned, not just where the government is concerned but, more importantly, in the trenches as businesses plan their operational strategies.
It's also important to note that today’s economy continues to be based more on global factors than solely on regional activity. The U.S., or any other country, is far from an economic island. There are numerous growing worldwide markets for all types of products, which can offer balance to a lack of demand in less-robust regions. However, along with that comes a global competition for resources which plays a role in the supply/demand equation and can result in inflation of some costs.
Our staff members have experienced a few recessions since we became involved in the metal construction industry in the mid-1980s. Based on our observations, economic slowdowns and recessions over the past 25 years have presented metal construction products with more opportunities than hardships.
During economic downturns, as project developers evaluate their options for construction materials, they tend to review their business partners more carefully. This means that the best, most innovative architects will never run out of work (as validated by recent Architecture Billings Index stats released by the American Institute of Architects). And for building owners who are looking to expand or renovate their facilities rather than build new structures, there are no better choices than retrofitting with metal roofing, metal walls, cold-formed steel framing and metal building systems.
For contractors, quality is always in demand, whether times are good or slow. It’s no secret that contractors throughout the U.S. and Canada, as well as in other areas of the world, are having difficulties in recruiting younger workers and ones with the highest potential. A constriction in the workforce, like the one that is already taking place in the slumping U.S. homebuilding market, allows the best construction workers to be identified and properly rewarded with the lion’s share of the business.
For metal construction product manufacturers and suppliers, a market downturn allows them an opportunity to differentiate the strengths of their offerings from alternatives. A common message in our world of metal construction products is that most offer distinct life-cycle advantages, environmental benefits, aesthetics, design flexibility and many other pluses. As members of The Metal Initiative (www.themetalinitiative.com) have learned from their many face-to-face meetings with building owners and developers over the past few years, the benefits of metal construction products are all magnified when presented directly to discerning buyers.
Is the U.S. in midst of, or headed for, a recession? Possibly. Should construction professionals and product suppliers be fearful? Cautious maybe, but not fearful.
Fear is generally thought to be based on the unknown. What happens with the economy may be unknown, but the metal construction industry’s offerings to the general construction marketplace are well-documented.
Based on our experiences with past market challenges and our knowledge of metal construction products, we know that market fluctuations offer opportunity. The opportunity is out there…best of luck going after it!
Shawn Zuver is editorial/content director for DesignandBuildwithMetal.com. He has been covering the metal construction industry, including residential and non-residential construction, since 1985. To contact Shawn, call (419) 581-2051 or email shawnz@designandbuildwithmetal.com.
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