ISHN

Will the goose make it through the holidays?

Business will be soft so long as uncertainty reins

January 4, 2013
It’s pretty clear that the life of the Goose that laid the Golden Egg is on the line. It seems that for the sake of partisan gridlock, the traditionally resilient U.S. economic Golden Goose may be a fiscal cliff fatality before January 1st.

Business is holding back

There’s a virtually unanimous opinion among safety distributors and manufacturers that the impediment to a healthy 2013 is the uncertainty of the impact Obama’s election will have on business. Everyone I contacted for feedback on this article said, in one way or another, “Business is holding back on spending until they understand how the new capital gains taxes, income taxes, health care costs, business regulations, environmental policy, energy policies, and the contentious budget issues will play out in the real world of 2013.”

It is hard to overstate the uncertainty about the future of our economy. Cutting to the chase, safety executives speculated that 2013 would be a soft year at best; a 2 to 3% growth rate for the safety industry was the best I heard in my conversations.

A soft market

Sal Longo, CEO of Northern Safety, predicted a soft market and, consequently, more consolidation within the industry. He continued, “Growth will have to come through increased market share which will force distributors to become increasingly innovative in how they approach the end user market.” He loudly echoed other CEOs on the devastating uncertainty created by the current political climate.

Scott Williams, CEO of Safety Products, Inc., shared the same sentiments, but added some positive thoughts. Infrastucture spending by the government may help many distributors and he suggested that China’s labor costs
and the upward creep of the yuan may provide a boost to domestic manufacturers.

Ironically, China’s labor costs and the upward trending yuan, may create potential sales disruption for some safety equipment importers as reported by one CEO. This same CEO expressed two other concerns; he has significant defense department business which he thinks will suffer under the current administration and he thinks the fiscal chaos in Europe will inevitably impact the U.S. markets.

So there you have it! 

Slow and steady as she goes until we see if we can steer this ship through foggy, iceberg waters. Good radar in the wheelhouse helps, but you’ve got to be real careful in an ebb tide.