January-February 2018

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30 PalletCentral • January-February 2018 Strong Growth in Second Half of 2017 et's start with the really good news. Economic activity ended 2017 with a strong upswing. Overall economic growth (as measured by Gross Domestic Product – GDP) was growing at a very healthy 3% rate. Retail sales grew much faster than most economists had expected. Improving business confidence and investment added to overall growth. GDP growth in 2017 could very well approach 4%. might believe. Employment growth was also upbeat. The unemployment rate remains extremely low, near 4%, which is making the consumer very confident about the future. This combined with the consumer's improving balance sheet, due to a surge in the stock market and rising house prices, guarantees that consumer spending will remain healthy in the first half of 2018. Perhaps the biggest surprise in the last few months was the surge in industrial production (IP). Despite fairly good GDP growth since 2010, IP growth (which is particularly important to the pallet Industry) was lagging behind. Growth was near zero in 2016, but started to improve in the first half of 2017. IP is finally catching up. Growth of IP hit 8% in the last quarter of 2017 and is now 2.5% above year ago levels. This is the best growth since 2012. No Recession in Sight, but Clouds are Forming The economic recovery that began after the great recession of 2008-9 is now approaching 10 years – a very long recovery by historic standards. That is why you keep seeing this question in the financial press: "When will the next recession begin?" It certainly will not be in 2018!! Besides a favorable outlook for consumer spending, the tax reduction for business suggests an even better year for investment in 2018. The modest tax cut for most households will add some fuel to the consumer spending boom. Stronger global economic growth should bolster U.S. exports of manufactured goods. Finally the late blooming housing market is building some momentum. Housing starts are now near 1.3 million units, with single family housing starts finally above 900,000 units. Starts will keep moving higher in 2018 since starts have fallen behind the rebound in housing demand. Low vacancy rates and rising house prices indicate there is a shortage of housing units. The median house price has shot up nearly 20% in the last 3 years, much faster than overall inflation. Thus, GDP growth should exceed 3% in 2018, the best year since 2005. IP growth should also exceed 3%. But the question we might be asking later in this year could be: "Was this too much of a good thing?" L THE ECONOMY BUILT Momentum ECONOMY By Lynn Michaelis LAST YEAR

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