An interesting presentation by Martin Lavelle of the Federal Reserve Bank Chicago - Detroit branch
The National Fluid Power Association (NFPA) holds an annual regional breakfast meeting in Detroit. This year's meeting was held at the Somerset Inn in Troy on Wednesday, May 22nd. The idea behind this meeting is that an informal gathering of fluid power industry professionals is a great way to share information and to network with peers, customers, and suppliers.
The breakfast was great, the company was pleasant and interesting, and the presentation was very informative. Martin Lavelle, Sr. Research Associate of the Federal Reserve Bank of Chicago's Detroit Branch, gave the address. One of Lavelle's responsibilites at the Fed is to compile information for the Beige Book. This report consists of anecdotal information on the current economic conditions of the region. In this case, the midwest region was of specific interest to the audience gathered in Troy.
Lavelle spoke of an underlying strength of the economy that has improved but warned of signs of uncertainties. In my discussions with fluid power marketers, this scenario bears out because the past few years have been strong but with many concerns. I think marketers continue to worry that things can change at any time. However, to ease the tension a bit, Lavelle said he expected the economy to grow by 3% in 2013 and 4% in 2014.
These are encouraging numbers if you consider that 2012 was a good year for most fluid power companies. Any growth over a good year should be welcome. This again checks out with most of the companies I have met with.
The automotive industry has made a strong comeback since 2009, and I just heard today that one of the big three automakers has made its last loan payment to the federal government. The economy in the midwest is still heavily involved with the auto industry.
Although housing can play an important role in our continued recovery, the overall market is still way down, but improving. Lavelle puts 1.3 million housing starts as a benchmark for a healthy housing market. We should see some growth, though, because the cost of existing homes has made a recovery back near 0.
At 7%, unemployment remains a concern. It seems that many companies are adding machinery and equipment instead of people. Skilled machinists are in demand more so than unskilled workers. A re-educated workforce could help in this regard.
Something called the outlook gap was mentioned, and I had never heard of this before, but it makes sense. It is the gap between the real GDP and what the GDP could be. It stands at 55% right now, and this is both good and bad — good because of great potential, but bad because we are falling so short of that potential.
I thank the NFPA for another outstanding event. I am proud to begin my term this year as Chairman of the Supplier Council and member of the Board of Directors.