Issue link: http://palletcentral.uberflip.com/i/1040159
palletcentral.com PalletCentral • September-October 2018 27 Interest Rates Long-term interest rates will also move higher. First, because of the tax cut that is boosting economic growth, the U.S. budget deficit will rise above $1 trillion in 2020. Second, the Federal Reserve plans to sell about $400 billion of long-term securities as part of the effort to unwind the excessive stimulus to get the economy back on track. Finally, business credit demands will rise to sustain the investment growth. If inflation picks up momentum next year, interest rates could move up even more. A primary concern for economists is the shrinking gap between long-term and short-term interest rates. Historically when short-term interest rates rise to or above long- term interest rates, the economy slips into recession. Since that is expected to occur in early 2020, a growing number of economists are forecasting a recession in 2020. They could be wrong, since that is an election year! Bottom Line: The next 4-6 quarters should be a very good period for pallet producers. Strong economic growth will continue into 2019. Lumber prices have passed their peak and are unlikely to move much higher unless forest fire disruptions intensify. The biggest issue will be keeping or attracting employees. Finally, the chances of a recession in 2020 are growing. The expansion will be over 10 years old by then. PC Lynn Michaelis is president of Strategic Economic Analysis, a company which assists business managers in thinking about the future. Although the primary focus of his firm is housing and wood products, the company stays current on overall economic activities in the USA and globally. Lynn may be reached atstratecon@icloud.com or 206-434-8102.