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Why 2015 is the time for distributors to spend

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Finance

Beaulieu (via ITREconomics.com)

Many people and companies remain pessimistic about the economy and how they’re doing, particularly those who look to the bubble of 2004 and 2005 as a baseline or who have houses that have failed to recover their value from before the recession.

Those people are wrong, at least in terms of the state of the U.S. economy, said Alan Beaulieu of ITR Economics on Wednesday at the NAW 2015 Executive Summit in Washington, D.C.

“These are the good times,” he said, and returned to that theme repeatedly during his presentation. As he argued, 2014 was a good year — just as his company predicted. The U.S. economy, despite reports to the contrary, remains the world’s largest and is growing in terms of GDP and industrial production. Employment is up, as are most leading indicators, and no one in D.C. is looking to impose austerity. 2015 will be a good year, if softer for many in terms of growth.

“We’re not an old, dying nation,” he said.

For businesses, and specifically the wholesaler-distributor industry he was speaking to, 2015 is a time to:

  • Be ruthlessly efficient.
  • Pursue BHAGs, or big, hairy audacious goals. Be aggressive in 2015 ahead of 2016.
  • Enjoy this moment of low energy prices but don’t assume they will last.
  • Pay for people and process in 2015, but don’t rush to add to headcount.
  • React to the shortage of skilled labor. Trucking is one such example that affects distributors. That shortage means pay will rise for many companies, squeezing margin and bringing price pressures, particularly in 2016 and ‘17.
  • Spend on training, and look to external partnerships for talent development (community colleges, even high schools).

The world is not without economic worries, Beaulieu said, but many of the problems that get media attention will not affect the broader economic picture, especially in the short-term, and especially for distributors. Such high-profile issues with minimal U.S. economic impact include the fiscal crisis in Greece, strife in Ukraine and Syria, and the result of November’s midterm elections. Even most acts of terrorism, Beaulieu said, won’t have significant economic effects, notwithstanding the other types of effects terror has.

What economic conditions should distributors be watching for in 2015? According to Beaulieu, these include:

  • Housing starts
  • U.S. and ITR leading indicators
  • Purchasing Managers INdex
  • Retail sales
  • Employment
  • Nondefense capital goods new orders

In the long term, the U.S. also has fiscal worries driven by factors such as an aging population and infrastructure in need of repair. For Beaulieu, however, those factors will most severely effect economic forecasts many years out — not this year or even in the three-year forecast.

An aging population means rising health care, Medicaid and Social Security costs, and a spike in the U.S. deficit. The need to refurbish American infrastructure faces funding challenges, but failure to do so would mean sacrificing part of America’s competitive advantage, Beaulieu said.

All those concerns remain far ahead. For now, he urged distribution leaders in the room, use 2015 to solidify their businesses and prepare for growth in 2015, 2016 and 2017.

James daSilva is a senior editor at SmartBrief and manages SmartBlog on Leadership. He edits SmartBrief’s newsletters on leadership and entrepreneurship, among others. Before joining SmartBrief, he was copy desk chief at a daily newspaper in New York. You can find him on Twitter discussing leadership and management issues @SBLeaders

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