The next few years should be strong for the glass and fenestration industries, but companies better use that time to prepare for the possibility of a huge economic shock in 2030, according to Alan Beaulieu, the president of ITR Economics, a research and consulting firm based in Manchester, N.H.
He gave a presentation on the economy as it relates to construction and manufacturing during the 2017 World Millwork Alliance convention and trade show in Charlotte, N.C., earlier in October.
According to Beaulieu, the U.S. economy “is going to be your friend well into 2018, but 2019 will be an off year for you.” That’s when he predicts a very mild recession will set in that could be exacerbated if Washington continues to clamp down on immigration.
“If Trump builds a 10-foot wall, I want to be the distributor selling 12-foot ladders,” he joked.
However, things will bounce back in 2020 and 2021.
“You’ll like those years,” he said.
The mild recession in 2019 could be an opportunity for companies with cash on hand to act and buy up businesses, because the media will exaggerate the recession and “that will scare the daylights out of people” who might be prone to speed up their plans to sell off their companies and retire.
Hurricanes Irma, Harvey and Maria did massive damage to the U.S. this fall, but Beaulieu says they really don’t do much damage to the country’s economy as a whole.
“Hurricanes aren’t big enough to hurt the macroeconomic forecast,” he said. “They hurt insurance companies, but they help construction companies. The U.S. economy is so large it can take a tremendous slam in our hull, but it doesn’t knock us off course.”
Our economic system can also weather the storms of politics, Beaulieu says.
“We do just as well under Democrats as we do under Republicans,” he said. “The economy is bigger than the White House. Now, the White House controls things. Obama’s EPA Clean Power Rule has an impact on markets and states, but things like that don’t impact GDP (gross domestic product, the total value of everything produced in a country). You’ll be fine no matter who’s in control. Business confidence doesn’t really favor one party over the other. What you do is much more important than what they do.”
He also said NAFTA will probably be renamed and reshuffled.
“It will probably be called Hafta,” he joked.
Energy is a huge part of any economy, and by that measure, the U.S. is sitting on a nearly unlimited gold mine.
“Thanks to fracking, we’re not going to run out of natural gas and oil for 300 years,” Beaulieu says. “Europe could run out in 30 years. Businesses go to where there’s a stable, low-cost energy base. Foreign investment is flowing here like crazy. We’re moving into an age where we won’t care about the Middle East. North America can be oil independent if we want to be.”
According to Beaulieu, the U.S. now produces 91 percent of the energy it consumes, making sudden fluctuations in oil prices much less important than in the past.
Depression on the Far Horizon?
As far as the possibility of a major depression in 2030, Beaulieu links it to several factors.
First, China’s economy could be slowing in the future. The country has more environmental problems that we can understand, Beaulieu says. They also have banking problems that are a “looming disaster.”
China also has terrible demographics thanks to its infamous one-child policy and a cultural bias toward male children. Because of that, there are now 125 million more young men than young women in China.
“That means a lack of taxpayers and a lack of economic strength,” says Beaulieu.
But the biggest problem on the horizon is healthcare in the U.S., he says.
“It’s demographics,” Beaulieu says. “There are 78 million baby boomers. By 2030, 70 million baby boomers will be consuming health care spending. Who gets to pay for that? The Gen Xers will, and so will the millennials. Unless we come up with a solution, we’re on a path toward financial destruction because of healthcare and baby boomers. This is a real problem. It doesn’t go away until the baby boomers do.”
Beaulieu says there’s no current plan to fix spending and debt. Because of that, interest rates will go up in the future. That will also help fuel the conditions for a depression.
“I think we’re on a path to be totally unsupportable,” he said. “By 2030, a depression could come, but if you save money strategically, you could position your business so you don’t feel it.”