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ON THE PVF PULSE


2011 post-recession take-off looks brighter than ever


W


ith the stock market’s near-8% December im- provement fulfilling its


role of economic prognosticator, a perfect storm of simultaneous events are combining to provide the thrust behind the long-awaited post-reces- sion comeback. Unexpectedly, the Lame Duck


Congress provided the spark that makes 2011 a near certainty for a major recovery. By maximizing available cash in consumer hands, re- taining the Bush-era tax cuts, cutting the Social Security payroll tax contri- bution by 331/3%, and extending the compensation for the unemployed, expanded spending by the consumer is practically guaranteed. But just as important is the 180°


turn in the sentiment of privately held businesses — which comprise the backbone of America’s 150-million employables. Even though the record percentage of unemployed will con- tinue to hover over an otherwise brightening economic landscape, it’s hoped that a major national infra- structure initiative, ignited by a more realistically oriented Congress, will absorb hundreds of thousands of this seemingly unabsorbable mass early in the year. Barring the negatives of employ-


ment absorption inability and an ex- plosive national debt, the following factors point to the best economic year since 2007: • As previously reported, the


American consumer seems to have found a balance between debt-cutting and continued expenditures. This is bound to continue into the year. • Businesses large and small are


piling up inventories in unanticipated quantities. Much of this is due to price increases coming down the pike. Also, expansion projects in commercial/industrial construction, power generation, oil and gas devel- opment, and renewable energy initia- tives are on the verge of a previously held-back breakthrough. • The expectation that the new


Congress and legal challenges will defang much of the business and con-


• Inventories on the rise • Coal, copper booming • American-made goods in demand overseas


• Consumers spending • Jobs market still grim


sumer-hostile tax aspects of the Oba- macare Health Act, which was due to collect taxes as of January 2011, al- though not ready for full implemen- tation until 2014. These and other positive economic


elements will help to overcome the pessimistic sentiment inspired by governmental fiat.


Emerging copper, coal booms defy current U.S. demand


Although global material as well as


agricultural commodities have re- cently surged upwards, what’s most surprising is that the once moribund copper and coal entities seem to be leading this unexpected emergence. It’s still difficult for most raw ma-


terial observers to put commodities in a global context, especially when they are digressing from domestic U.S. trends. In past recession recov- eries, all eyes were peeled on the overwhelming appetite of America’s business and consumer demand. No more. For the first time ever, the Southeast Asian quadrant and such other developing nations as Brazil, Russia and Turkey are setting the pace. Coal had been literally given up for dead as the Environmental Protection


user of the red metal would normally signal a copper demand implosion. But like coal, the demand push for copper is now emanating from the world’s emerging nations like never before. China, which used to brag about


building cities the size of Indianapo- lis every month, is now building them the size of New York with equal fre- quency. Other emerging nations are also generating new construction in varying expanded degrees. But new supplies are more difficult


to find than ever in recent past, lead- ing to price increases registered well over $4 per pound. During most of the second half of the 20th century, this price range teetered between 75 cents and $1. Most of the world’s commodity exchanges are putting copper at the top of the list of future scarce commodities, with price in- creases the inevitable outcome.


Manufacturing comeback not major employment facilitator


As a blizzard of overwhelming sta-


tistics pointed to a major manufactur- ing comeback in December, it would be natural to assume that such good news would serve as a magnet for substantial employment additions.


oil and gas development, and renewable energy initiatives are on the verge of a previously held-back breakthrough.


increases coming down the pike. Also, expansion projects in commercial/industrial construction, power generation,


Businesses large and small are piling up inventories in unanticipated quantities. Much of this is due to price


Agency has been given free rein by the White House to forbid use of coal in the construction of additional util- ity facilities, and pressing existing power stations to convert to natural gas or even “renewables” wherever possible. However, U.S. coal companies


have never been busier, finding no dearth of demand from around the world. The rising common stock prices of such coal giants as Patriot Coal and Peabody Energy reflect this worldwide demand for U.S. coal, rep- resenting the globe’s largest reserves of this raw material. The advent of the current copper


boom is caused by a demand/supply inversion, which seems out of sync with what’s happening in the U.S. With America’s housing market in deep depression, this overwhelming


• Be sure to visit www.thewholesaler.com for web exclusive articles and videos! • Unfortunately, the current surge is


not being joined by a back-to-work movement by the vast mass of those looking for gainful employment. In an ironic twist, businesses large and small turned to production and back office technology to reach record 2010 production, while reducing costs. Fear of Obamacare taxes and anticipation of excruciating financial regulations scared the business com- munity into divesting employees and strengthening its mechanical capabil- ities by generating more revenues, and greater profits, with reduced headcounts. To put the manufacturing sector’s


traditional employment approach into historical perspective, 50 years ago the production of goods generated the nation’s highest number of workers, with the construction sector not too


BY MORRIS R. BESCHLOSS PVF and economic analyst emeritus


far behind. At that time, 15 million people were employed in such major industries as automotive, steel, ma- chinery, mill supplies, electronics, and thousands of parts suppliers, etc. Currently, with a U.S. population


almost twice as large as in 1960, only about 8 million personnel are now in- volved in a variety of manufacturing establishments. Despite the historical reduction of the major traditional em- ployers, such as the once-mighty, world-leading automotive producers, that sector is turning to ever greater conversions toward automation, mechanization and upgrading. During November, the manufactur-


ing sector as a whole reached the highest capacity utilization since mid-2008 at 75.2%, but this is still a far cry from the average mid-80s av- erage generated in the first part of the last decade. With the current utilization growth


not expected to come even near the previous traditional figures, machin- ery and technology power — rather than hands-on personnel productivity — will set the pace for America’s manufacturing future. Paramount in such recovery will be the global ad- miration for American brand names, and the greater thrust recently evi- denced in “Made in America.”


Increased consumer spending fuels 2011 hopes for business optimism


Despite record-high post-recession


unemployment, a continuing reduc- tion in consumer debt, and growing anxiety over increasing national debt and decreasing public services, con- sumer spending last year was increas- ing at a rate not seen since 2006. What is most mystifying about this


trend is that the national savings rate returned to a solid plus 5%, after wal- lowing in deficits during the first decade of this century. In fact, consumer spending as a


percentage of gross domestic product has not digressed from the upper 60% component of the nation’s $14.3-tril- lion GDP despite the weak post-re- cession rebound, the reduction in credit card borrowing, and the in- creasing tendency to put more money (Turn to Stronger 2011, page 28.)


•THE WHOLESALER® — FEBRUARY 2011


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