Special Report: 8.13.2009

Posted by Web Master on Thursday, August 13, 2009

Distributors & Building Infrastructure
Bisbee says “Talk to a distributor”

Frank Bisbee provides a service to the industry (a lot of industries, actually) each month with his “Heard on the Street” roundup on Wireville.com. It’s long, it’s got a lot of important stuff in it, and (according to Frank, who is—disclaimer—a friend of mine), one heck of a lot of people click through to it.

Most of HOTS is stuff Frank saw, liked, and posted. But, at the very top (in “Bizbee’s Buzz”) he writes something original and important. Here’s what he said in July:

“Planning the infrastructure is one of the most important steps to reduce expenses over the life of the installation. Today, our buildings have five basic components to the infrastructure: POWER—CONTROLS—COMMUNICATIONS—SECURITY—LIFE & PROPERTY SAFETY SYSTEMS.  All of these systems need to be integrated for a maximized value.

“At the earliest point in the planning process the smart consumer and contractor should sit down with a value-added full service distributor. The distributor will bring a vast resource of information and expertise to the project. Going it alone is risky and often results in much higher costs in both the initial and long term costs.”

Frank’s advice to his readers, then, is…to talk to YOU.

Green Life, Smart Life
…includes Lutron controls

According to Nation’s Building News, Lutron’s Homeworks system will be featured in Green Life Smart Life, a “green building showcase in Rhode Island.”

What is GLSL? At the site you find this:

“Green building is just one piece of a much larger puzzle. Green Life Smart Life hopes to serve everyone with tools and resources to navigate through the sometimes confusing and complicated route of living a lower impact life.”

Interesting, isn’t it? Living a less-complicated life, with reliance on less stuff and a reduced amount of energy, can be “confusing;” one needs instruction on how to do it.

3M: Some Shrinkage “Not Temporary”
…some sectors won’t come back quickly

From George Buckley, chair/president/CEO at 3M (emphasis added by Joe S.):

“…we reduced staffing levels across the world by another 1,600 people, about 900 of whom came through restructuring (almost all in Europe and Asia) and another 700 via an early retirement program in the United States.

“We absolutely do not take any pleasure in such things, but they are a sad feature of our life in these tough times. We also continued to streamline our factory operations to suit what we think will be the manufacturing footprint, excuse me, we need long-term.

“Some of what we see in the shrinking economy is probably not temporary. We think there are a few end markets that may have been fundamentally reset downwards, and perhaps so for many years.”

The Economy is Getting Better?
Check your assumptions 

Here’s a short piece, reprinted from a subscription-only investment news service, that gives the lie to many of the positives bandied about recently in the media. Key points:

• U.S. GDP in Q2 (the first estimate, recently announced) actually was worse than one could reasonably anticipate from prior government data.
• Government economists monkeyed with the GDP’s “implicit price deflator” to create the image of a recovery. Q1’s deflator was originally given as -2.8% (deflation), then revised to -1.9%. The Q2 initial estimate put the deflator as -2% (almost flat). Going from -2.8% to -1.9% makes Q2 GDP bigger!!!
• Those two analytical points might be hard to grasp. But try this on: GDP in Q2 was reported as -1%, despite a 10.9% increase in government spending.

SO: We’re borrowing ourselves into oblivion and reporting data of which you should be suspicious, all in order to provide some “good feeling” to citizens. Yet GDP is still negative (and perhaps more negative than we’re being led to believe). You might accuse the Obama Administration of unthinkable sins, except for the fact that the Bush and Clinton eras featured the same sort of data manipulation.

It’s just a lot more important now, isn’t it?

Construction Doldrums, for Years?
FMI’s forecast to 2013

FMI Corp. is the leading consulting firm in the construction industry. The group has an economist (Heather Jones) and emits a quarterly forecast (see the Q2 effort here—downloadable PDF). This was noted in last week’s TedMag’s news; here’s a bit more.

Put pages four and five of the PDF together on your desk. This is the two-page data explosion from FMI (actual numbers from the government, forecasts from Ms. Jones). It’s a heck of a lot of data. Look (for a moment) at the very bottom line of the top table.

Total construction put in place (years selected by Joe S.)

1999            $744,551,000,000
2003            $891,497,000,000
2005            $1,102,705,000,000
2008            $1,074,092,000,000

Now, you know how the years 2006-09 have been increasingly…mediocre? Here are FMI’s projections and forecasts for total construction put-in place:

2009            $938,881,000,000
2010            $872,551,000,000
2011            $912,739,000,000
2012            $877,819,000,000
2013            $1,051,237,000,000

If FMI’s forecast turns out to be accurate, we won’t return to the 2005-2008 period’s level of construction activity until 2013. There’s nothing in here about inflation, by the way, so you might assume that $1.05 trillion in 2013 doesn’t equate to 2005 in actual activity.

To look deeper into one number, non-residential construction spending was $462.6 billion in 2007, $511 billion in 2008, and is forecast to hit a low of $363.3 billion in 2011—rebounding only to $415.6 billion in 2013.

Why this is here: Most forecasters won’t fearlessly plunge many years into the future. FMI does. Who knows what the 2013 forecast is really worth? But this summary suffices:

The leading management consulting firm in construction says nonresidential, and construction as a whole, is going to decline or march in place for the next 4½ years.

Housing Data: Great? Or Not-So-Good?
You must work harder to get at Truth.

Decades ago, when I was young enough to think I could be anything, I took classes in writing screenplays (scripts for movies). The teacher was magnificent (not his fault I sucked). Example: He offered a four-word mantra for what we aspiring writers should do with characters: “Define, describe, contrast, compare.”

Let’s apply that formula to views of last month’s housing starts data:

HousingZone.com—Housing Starts and Permits Rise Sharply in June.

BuilderOnline.com (blog)—Good News Bears Repeating

The Big Picture (blog)—Housing Starts Fall 46%

These were responses to government data. HousingZone offered straight news; the blog is from Builder magazine’s editor. The Big Picture blogger is Barry Ritholtz, who actually knows how to read economic data. In the entry linked above, Ritholtz claims:

“…much of the media reportage on this was simply innumerate—the numerical equivalent of illiteracy. Not just a little wrong, but totally, embarrassingly incorrect.

News sources that just plain missed the story (Bloomberg, Marketwatch, Reuters, and The Wall Street Journal), he wrote, adding:

“…it makes you wonder if these people can count to 21 unless they are naked.”

Relevant points:

1. These days, you can’t believe any report (from the government, media, whoever)—even one which just regurgitates data from a release.
2. We all hear the mainstream news media is being supplanted by the Internet, bloggers, etc.…maybe there are GOOD reasons for that?
3. On economic/financial data, you might have thunk that—after what we’ve been through lately—folks would be more careful before releasing the balloons and starting a celebration. But, no. Once again, we’re end-zone dancing at about the 30-yard line!!!

Perspective: The Best We’ll Do?
…”What do we do for an encore?”

There might well be a “bounce” going on right now. What surprises (me, at least) is the idea that there’s more growth to come. For perspective, I went to David Rosenberg, formerly the economist at Merrill Lynch. Rosenberg has relocated to his native Canada and works now for Gluskin Sheff; if you go to that web page, you can subscribe (free) to his economic reports. Some selected ideas:

From the Q2 U.S. GDP report: “Consumer spending came in at -1.2% annualized, twice the decline expected by the consensus [of economists]. This occurred in the face of gargantuan fiscal stimulus and leaves [one] wondering how this critical 70% of the economy is going to perform as the cash-flow boost from Uncle Sam’s generosity recedes in the second half of the year.

“Imagine, government transfers to the household sector exploded [in Q2] at a 33% annual rate, while tax payments imploded at a 33% annual rate—and the best we can do is a -1.2% annualized decline in consumer spending in real terms and flat in nominal terms? What do we do for an encore?” —July 31

“The [federal] government has its hands in 40% of the economy and when public sector officials can influence how banks can value their assets, how mortgage services should be doing their business, who shall fail in the financial industry and who shall not; and when we have a central bank that is not just the lender but the market of last resort, even for RVs, and a government willing to turn up its deficit to levels that would have made FDR blush, then perhaps we can end up seeing a recovery occur sooner than we had thought.

“The data have been mixed overall, but certainly have been beating expectations for the most part. The question really is, as was the case in Japan, whether there is a fundamental change in the trend or whether we are seeing noise around a secular downtrend.

“In any event, the recovery we are seeing is the result, by and larger, of a myriad of government patchwork…” —July 30

Salimando’s conclusion, based on this and a lot else: Those who gamble that the worst has been seen in the United States and global economy are setting themselves up for a shellacking.

Yes, the 2000-2002 downturn was no fun at all, and the 2007-2009 “Great Recession” has, so far, been even less enjoyable. Expecting better out of the last months of 2009 and all of 2010-2012 might be laudable optimism, but you must mix in a fair bit of caution!

UNMISSABLE STUFF
Linkfest No. 3

Purchasing magazine now has a “community” site—PurchasingBizConnect.com. Of interest to distributors: The site’s blogs, including The War Room—“for people who buy commodities, parts, products and services every day.”

From SDM, a security industry magazine:

Which Wire Should I Use?—“Installers need an easily repeatable installation practice that is low in cost for both labor and materials. Equally, they need a transmission method that does justice to today’s cameras. There’s no point in installing a high-resolution camera if the head end only gets 330 lines of resolution.”

Designed for Distance—“Coaxial cable, UTP Category cable, fiber-optic cable—each can work flawlessly when properly planned and installed, and each technology serves different distance requirements.”

Planning to start “tweeting” on the electrical industry and the NEC: Mike Holt!

How to spend your stimulus funds on LED street lighting (June 12 blog item).

Anti-counterfeiting’s importance has obtained lots of exposure lately, thanks to NAED, NECA, and NEMA. Here’s something along the same lines from BEAMA, which is working—in the United Kingdom, of course—with the EDA and ECA. (hat tip: IAEI)

Bloggers on the real estate site GlobeSt.com are positively negative. This lady lawyer sees “an approaching tsunami…for banks, special servicers, and other CRE lenders.” The TrendCzar notes that major developers “know it’s just a matter of time before a sudden, quick descent starts leading to an ignominious crash.  It’s a delayed wipe-out.”

What does this mean for construction? And for the general economy?

  

	Joe Salimando of EFJ Enterprises is a consultant, web content provider, and wordsmith based in Oakton, Va. To contact him, call 703-255-1428. See also The EleBlog.
Personal Disclaimer: The appearance of the ambling pachyderm is indicative of the writer’s obsession with elephants, not his political leanings.
IMPORTANT NOTE: THIS COLUMN REFLECTS ONLY THE OPINIONS OF ITS AUTHOR AND DOES NOT REFLECT THE OPINIONS OR POLICIES OF NAED, TED MAGAZINE, OR THE ADVERTISERS ON THE TEDMAG WEB SITE.