Thursday, August 13, 2015

Economic Themes from IEOC

Earlier this week, the National Fluid Power Association NFPA held its annual Industry and Economic Outlook Conference in Wheeling, IL.  Lots of economic details about the past year and the coming year were presented to the record 322 attendees.



While each speaker had a specialty that related to the fluid power industry, there were some recurring themes that are in my takeaway.  The first involves oil and gas production and the lower prices we have seen in the past year or so.  Lower prices have lead to lower activity in the U.S. meaning slower sales of components.  While the consumers benefit from the lower price of energy, the producers struggle with it.


It seems like most experts feel that the price per barrel of crude oil will continue to hover around the $50 or so mark.  That has an effect on the exploration and production of shale oil and gas.  While it is not shut off, it is just less profitable.  It also affects the import of less expensive foreign oil.  It does appear that we are on the verge, however, of being energy independent.

Another theme, was the strong U.S. dollar.  With this strength, our exports become a little more difficult affecting overall production of machinery and other exportable goods.  Our dollar has become the preferred currently around the world.

China has devalued their currency and their economy has slowed down.  China is a large consumer of natural resources and the slowdown will affect the world economy.

The fluid power industry has experienced a difficult year overall with estimates for growth being somewhere between negative 6 and 10 percent for 2015.  Certain segments of the industry have done better than others but it could be mid-2016 before we see an overall pick up.

All in all, the U.S. economy is on a much more normal cycle than what we saw in 2008 and 2009.  We should still be years away from the next recession with GDP growth estimated to be over 2% for this year and next.