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MECHANICAL CONTRACTING | PVF | CONTINUED FROM PAGE 48


should prompt a ray of sunshine in an overall dreary economic outlook. With consumption providing close to 70% of America’s


overall gross domestic product formation, it would appear that the U.S. consumer is leading the way out of the current recessionary maze. However, overshadowed by this glowing report was the University of Michigan consumer sentiment index, which reached the level of pessimism last experienced in the darkest days of the post mid-September 2008 recession. Based on the belief of the majority of average American


consumers, this recession is still enveloping the attitudes of the American public, depressed by an actual double digit unemployment figure and no improvement in job availability on the horizon. Even though September retail sales were generally broad-


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based, they were heavily weighted toward such necessities as motor vehicle replacement parts, as well as new cars purchased to replace those having been held longer than usual by American drivers. Also exceeding the average was clothing and other accessories needed to fulfill the public’s needs,


rather than discretionary purchases. Significant in analyzing the detail of September purchases is


that they showed a distinct shift toward value buying, with discount stores thriving well above up-scale department and specialty stores. However, recent improvement in consumer- confidence figures offer a ray of sunshine. Online purchases, although still relatively small in the


context of total retail sales activity, are growing at a double- digit rate, and “Cyber Monday” sales broke last year’s records. Further complicating the future outlook are import prices, which are running 13.4% over September last year. While this is slightly closing the gap with comparable U.S.-made products, this has somewhat shifted the balance toward


“Made in America”. This trend could increase in the foreseeable future, as both available inventory and overall value swing toward U.S. production capability, quality and service reawaken the public’s interest in “homemade goods”.


Internal corporate capital expenditures hit all-time high


Non-defense capital goods orders, excluding military and


commercial aircraft, hit an all-time high of $68.9 billion in September, surpassing the previous high of $68.5 billion in April 2008. The latter came at the peak of the pre-recession boom preceding the global financial disaster of September 2008, ushering in the most recent recession. These numbers represent the investment dollars that U.S.


companies, large and small, spent on capital equipment expansion and replacement. What makes these gross expenditures so phenomenal is that an overwhelming majority were allocated to automation, upgrading and mechanization of existing facilities, rather than expansion. It ratifies what these columns have attested to in the past


year; that business and industry are focusing on greater unit productivity, in markets that are squeezing profit margins between higher raw material costs on the one hand and customers’ low demand and non-acceptance of price increases on the other. As often repeated here, it is also part of a widespread


resistance movement against federal, and even state and local, governments to impose greater costs on America’s independent business sector. Since the overwhelming percentage of such non-publicly traded companies produces their goods and services within the borders of America’s 50 states, shifting production abroad is generally not an option. In fact, our surveys indicate that maintaining domestic control over quality and inventory levels ranks high in priorities that such manufacturers, distributors, contractors and retailers impose on themselves. This ever-hardening position, in the face of perceived


government hostility, has increasingly negatively impacted employment. It has further shifted the relocation within the U.S. from such high tax states as New York, California and Illinois to Texas, Nevada and the Carolinas, where state governments have made the hiring climate more propitious. The insensitivity of U.S. government-controlled agencies


like EPA, SEC and FTC in coagulating the arteries of businesses desperately desiring to prevail in a stagnant economy, will make it difficult for America’s private employment sector to absorb new entries into the labor pool, much less reduce the high recession level employment rate. An American economic decision showdown will have to


await the November 6, 2012, general elections to determine this nation’s economic course. ;


e Circle 39 on reader reply form on page 111


Morris R. Beschloss, a 55-year veteran of the pipe, valve and fitting industry, is PVF and economic analyst emeritus for sister publication The Wholesaler.


phc december 2011 www.phcnews.com


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