Touting the Strongest Economy in the World
Forget politics and the person in the White House. Forget Republicans and Democrats — and even China, Russia, Brexit, and the Middle East.
Nothing that happens for the foreseeable future—except perhaps a world war—will make a significant dent in the strength and growth of the U.S. economy.
“None of that matters,” declares highly regarded economist Alan Beaulieu, president of ITR economics, a firm with a record of accurately prognosticating the economy. Beaulieu recently told the MSCI Carbon Conference “the economy is totally agnostic. We did a study of which political party most affected the economy over time. Neither one of them made a significant difference. This economy is so powerful. It is simply much larger than any political drama that is unfolding.”
The economy is propelled or retarded by other forces, he explained. Like macroeconomic and demographic forces such as technology advances, energy supplies and prices, environmental concerns, and the need to care for an aging population in a cost-effective manner. Beaulieu complained, “Half of America does not have an economic clue about who we are and what we are about. Fifty percent of the people believe China has a larger economy than ours.”
What of the so-called “Trump Bump” in the economy that we read so much about? “GDP began moving up before the election, as did the stock market,” Beaulieu said. “But that is very good news because it means that the strength we are showing is fundamental and not hype.”
Our growth, though viewed as slow and mediocre by many, is right in line with historical trends. “GDP growth has averaged 2.4% over the last 30 years,” Beaulieu said. “So if you are waiting for 4 or 4.5% GDP growth, you have a long wait and you will not act. But these are exactly the days to act, to take risks, to invest in the productivity of your businesses.”
But Beaulieu does predict that our increasing national debt, the rising cost of medical care and social security will catch up to us without some changes. “We are looking at GDP growth dropping temporarily to perhaps 1.9% in 2019,” he said. “A mild recession and nothing that the economy can’t handle if businesses retain enough cash on hand to ride it out. It does, however, bode ill for the sitting president, even though he will have nothing to do with it. I would think that Trump, as a result, will have just a four-year run.”
The real dangers
The bigger danger with an aging society, according to Beaulieu, is if we don’t control medical and social security costs, and impose the necessary taxes to pay for the escalating demands of our older citizens. We, along with the world’s major economies, will plunge into a global depression around 2030. “But Millennials are the answer to a lot of this,” Beaulieu said. “There are more of them than us now, and they want to get married and have kids and buy things as much or more than we ever did.” Their spending and social consciousness will be an engine of growth, he predicted.
Meanwhile, we must appreciate the inherent strength that is now built into this economy. “The U.S. is almost energy independent,” he explained. “We produce about 93% of what we use and are no longer beholden to any foreign power for energy. An energy independent nation is a rich one. We have 300 years worth of oil and gas in the ground. Renewables are expanding as well.
Beaulieu acknowledged that despite all this good news, “steel has taken it on the chin. But as a whole, the country is doing well. We still make things in this country and we are competitive. It’s just that automation and increased productivity have changed the nature of manufacturing. Manufacturing jobs are at an eight-year high.”
End use market strengths
The economist sees significant strength in several end use markets along the industrial metals supply chain. He pointed to automotive, and particularly vehicle bodies, trailers and parts, where sales are at record highs and likely to continue that way. He said housing construction would also remain a strength.
Of course, he said, if the administration can get its act together on a sizeable infrastructure package that would be an enormous boost for the industrial metals supply chain as well. Beaulieu also pointed to defense, energy and durable goods as strong points.
A wave of world trade protectionism, he cautioned, could throw a wet blanket on all of this. As would strong regional aggressions by Russia or China, or in the Middle East — any of which is a nagging possibility.
The ITR economist seemed untroubled by these downside risks. “Foreign direct investment here remains strong,” he said. “The world is saying this is a great place to do business. We are, after all, still the safest place on the planet.”