The housing industry is extremely important to HARDI members and to the economy in general. The housing industry led us into the recession and it will lead us into a recovery. There is some good news in that the sales of existing homes have improved in recent months. The input from housing starts itself is still weak, but we think we are on track for a leveling of the housing trend for 2010 and a rise for 2011.
It is important that all of us prepare for the recovery and not continue to focus on the recession. This may be hard to do given the prolonged and painful nature of the downturn, but we must start making plans now in order to maximize the coming recovery. We will be talking in much greater depth about this at the annual meeting in Orlando this fall. Our discussions there will help you set realistic budgets for the coming two years.
In general, start thinking about spending more money on marketing and advertising that is focused on your competitive advantages and not just on price. We must all answer the “why buy from us?” by offering something more than low-cost commodity items if we want to be profitable in the next two years. Businesses that only focus on being the low-cost provider will be out of business before this is all over with.
This is also a great time to review your preparedness for a recovery in terms of having properly trained and motivated people and smooth running systems that will improve customer service.
We will be discussing this more in Orlando, but inflation is coming along with higher interest rates. Be sure to give this some serious consideration before setting your budgets for 2010 and 2011.
The U.S. economy
The U.S. general economic recession is expected to last until late 2009 or early 2010. Most of the world's economies share in this pain, which for some reason makes some people feel better. But in reality this hurts us as exports dry up despite the relative weakness of the dollar.
There have been a number of well-intentioned folks who have talked about a V-shaped recovery beginning in mid-2009. You may have noticed that that did not happen. There has also been discussion that the recovery is “here”; sorry, not yet. Annual U.S. Industrial Production is 7.6 percent below the year-ago level, which is the worst year-over-year comparison in more than 33 years. New orders are in a well-defined negative trend, and the consumer sector trends are bleak heading through midyear. It is going to take some time for these trends to reverse direction. The global recovery is going to have its start here in the United States if it is going to be a viable upturn that will endure.
Fortunately, there are indeed some tentative signs of a developing recovery. The U.S. leading indicator, the purchasing managers index, corporate bond prices, existing home sales, and the money supply are all throwing off positive signals that there is a recovery coming in the United States beginning in early 2010. There is even good news coming from the stock market with a better-than-even chance that the bull market is sustainable.
A fair amount of speculation has kept oil prices higher than what seems reasonable given the suppression of global demand as the recession continues. With prices floating below $75 a barrel, there should be no real concern that high energy costs will be hampering the recovery or crippling business or consumer budgets.
Our analysis suggests that oil prices will ease off in conjunction with the pullback in demand. Flight from the U.S. dollar and anticipated economic growth have kept prices creeping higher recently, but eventually prices will reflect the current economic situations.
Retail Sales must begin to improve before we can say a recovery has begun, and we are not there yet. Consumer spending on an annual basis is 4.1 percent below last year, reflecting the worst year-over-year comparison in 60 years. That means most of us have never lived through this severe a consumer problem, let alone figured out how to deal with it. The seasonal rise to date is weak and not conducive to a recovery, at least not yet. The projection for Christmas 2009 is that it will come in below Christmas 2008.