Trends & analysis
Economic Stabilization Act
Source: Institute for Trend Research, Concord, N.H. | Compiled by Sahely Mukerji
What it means
What you should do
• We have just witnessed the biggest government
bailout in our lifetime: more than $1.5 trillion
in promises and commitments and counting. This
does not include Fannie Mae and Freddie Mac and
the $5 trillion “take-over” of those institutions.
• Prepare for a general recession in 2009.
• This is more than a “credit crunch.” North America
is in trouble; Europe’s growth is slowing. Japan
is as well. The BRIC economies (Brazil, Russia,
India and China) are showing signs of weakening
and expected to follow this downward slope in
2009.
• At the National Governors Association meeting
earlier this year, 15 governors said their states
were in the red in 2008. Forty governors expected
to be in the red in 2009.
• Nonresidential construction lags economy.
Make the most of 2009.
• Revenues from taxes are already falling behind
and next year is expected to be even more difficult.
• 2010 likely to be challenging for glaziers.
• Caution against linear projections. Maintain a
strong cash position. Avoid large capital expenditures that do not translate into market share
gains.
• Normally, this sector is “recession proof,” but
the extent of the economic crisis will stretch that
in the coming two years, at least.
Commercial buildings construction
Year-to-year percent change
R-O-C
30
30
25
25
20
20
15
15
10
10
5
5
4.7%
0
0
-5
-10
-10
Quarterly Moving Total
Annual Moving Total
-15
-20
'96
'98
'00
'02
'04
'06
'08
'10
What you should do:
• The bailout will not
reverse this trend
• Take on “smaller”
jobs, remodels
• Think differently
React faster
• Strict on accounts
receivables
• Diversify - medical,
educational, midsize
hi-tech companies,
targeted regions
Office buildings construction
Retail sales excluding automobiles (adjusted for inflation)
Year-to-year percent change
Year-to-year percent change
R-O-C
Rate of Change
10
10
8
8
6
6
4
4
2
2
0
0
-0.7%
Quarterly Moving Total
Annual Moving Total
-2
-3.4%
-4
-4
'94
-15
-20
'94
-2
-5
-6.8%
What it means:
• Record amount of new
space built in 2007
• Best of days are over
• Steeper-than-normal
decline in affect
• Overbuild will extend
through ’09 & ‘10
• Vacancy rates are
climbing
• Permits for new space
lowest since 2000
'96
'98
'00
'02
'04
'06
'08
'10
What it means:
• Two-thirds of GDP
reflected here
• Entering first retail
recession since ’93
• 7,000 stores will close
in ’08, same in ’09
• Commercial construction decline through
2011.
What you should do:
• Diversify now
• Reduce overhead costs
• Conserve cash –
improve efficiencies
• Growth through market
share
50
50
40
40
30
30
20
20
11.7%
10
10
8.3%
0
0
-10
-10
-20
-20
-30
-30
Quarterly Moving Total
Annual Moving Total
-40
-40
-50
-50
'94
'96
'98
'00
'02
'04
'06
'08
'10
What it means:
• Spending at record
levels
• Long rising trend is over
• Newly contracted space
down 32.8 percent
• Unemployment means
rising vacancy rates
• 2010 and 2011 likely
challenging years
What you should do:
• Change value
proposition
• Re-train sales for
recessionary times
• Avoid straight line
forecasts for ’09
• Put capital expenditures
on hold
• Maintain a strong cash
position