NAED National Virtual Meeting: Economists Find Bright Spots

Bill Putsis
Alan Beaulieu

At the first-ever NAED National Virtual Meeting, NAED wanted to give it’s members a better way to understand the economic crisis we are currently experiencing. To do that, they invited economic expert Alan Beaulieu, Ph.D., President of ITR Economics and author of Prosperity in the Age of Decline; and William Putsis, Ph.D., Professor of Marketing, Economics and Business Strategy at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.

The industry is looking for guidance on how to deal with our uncertain economy, and Beaulieu wants to share his team’s forecasts to help break down what is happening and what is to come.

“We’re in unprecedented times – two black swan events: COVID-19 and the oil crisis,” begins Beaulieu. “And since it’s unprecedented, how do you forecast in [these] times?”

To do this, Beaulieu says they had to look back to multiple similar cases and put them together. For the oil crisis, ITR went back to the 1970s and to 2015/2016 when prices cratered and there was trouble in the oil industry. For the COVID-19 pandemic, they went back to other significant downturns in the economy, such as the early 1980s as well as the 2008/2009 recession, to see what help government stimulus offered and what worked and what didn’t. Fear was also a factor in the forecast, as people face going out in public again and dealing with possible exposure, some for the first time.

First, Beaulieu says that we are on the downside of the COVID-19 daily deaths. “While we won’t be through this tomorrow, we are on the backside of the curve,” he points out. “There is a lot of talk that with the re-opening, [daily COVID-19 deaths are] going to spike [again], there’s a massive second wave coming… So far, that’s just talk.”


One of Beaulieu’s main goals of the session was to reach an understanding that there are some industries that are going to take a long time to recover, “but this is not the Great Recession, in most respects,” he encourages. “This is not something that’s going to be knocking the wind out of your sales for years and years to come.”

Beaulieu continues, “This is going to be something that you’ll get through in the relative short-term for most of your industries… and you need to be thinking about 2021 in a more positive light and what are you going to do to take advantage of that rising trend.”

When looking at the CARES Act of 2020 that the federal government stepped in with, Beaulieu says this massive amount of spending is like nothing seen before in the history of the United States. “I’m often asked ‘Did they do a good job?’,” says Beaulieu. “And the answer is yes, as a matter of fact, they did.”

The Federal Reserve also stepped in and kept the liquidity markets open, a key difference from what happened in the 2008 recession. Beaulieu gives the example of the economy being like a piece of machinery. “In 2008, the machinery froze. We had a piece of equipment called the economy and it ran out of oil. No more lubricant. It just seized. And to repair a seized engine is a big deal. This is not [what is happening now]. As a result of COVID-19, states across the union, with federal urging and guidance, hit a switch, and they shut it down. As you shut down a machine, it’s much easier to start it back up, and as they start it back up, there is a phased process that must be gone through. That’s part of our forecast going forward – we don’t anticipate a massive main switch, but we do anticipate people going back to work, buying again, businesses going forward. And with Main Street coming online (we hope before too long), and $2.3 billion going to larger businesses, a normal yield curve is apparent again. We [will] see life going forward with the liquidity that we need to keep the economy going.”

Moving on to look at the macroeconomic indicators, Beaulieu says that, while the indicators may be down, “that’s not to say that they’re down and out for the count. The indicators are going to come back when the stock market continues to work its way upward.” He believes it will show that the world has some confidence and that the indicators will signal a positive trend.


Another big event happening now is that we have re-openings in many states. “As we see openings in key states and in the middle of the country, we know that the economy is stirring and that the sleeping giant is coming back to life,” he says. “Overall we think that the U.S. will be slow coming back to retail sales. But we will see brick and mortar come back.”

Putsis agrees that sales will be sluggish and warns that some distribution customers that are lost may not come back. “There’s a significant body of research that suggests that 75 percent of consumers and 80 percent of businesses who shift to a lower-priced alternative during a downturn, never come back,” he says. “So, if you’re losing share now, when we come to a recovery, there’s a good chance that they won’t come back.”

While Beaulieu says that consumers will be hesitant, in part due to stay-at-home orders, his real concern is the unemployment trend. “My gosh, what a mess. Over 30 million people unemployed as a result of shutting down businesses and the economy – that will take years to come back. That is worse than the Great Recession by a lot.”

“We’re going to see millions of people get their jobs back, but [this] will have resulted in a shift in employment for the next two years, where not all people are going to get their jobs back,” Beaulieu continues. “You can’t hurt businesses the way they have been hurt and expect that they’re going to rebound to full employment really quickly.”

Putsis adds that there will be fundamental shifts in the way people behave, and what we do as businesses will change. “We know businesses will fail. Some won’t survive this stress test.”

According to Putsis, there are three reasons why companies don’t come out of a downturn:

  • Lack of liquidity
  • Don’t act fast enough coming out of the downturn
  • Relying on everything going right coming out of the downturn

Following the old adage that “bad things come in threes,” Putsis also warns that something else is likely to follow this pandemic and the oil crisis. “We’re likely to have a third event,” Putsis says. “There is going to be something else, and we need to be prepared for it.”


Putsis says one key way to put your company into an advantageous position is to find a strategic control point. An example of this is illustrated by the company Softsoap. The soap maker was looking for a way to gain market share, and keep their competitors at a distance while they did it. They then decided to buy up the world’s supply of pumps, keeping their competition from being able to access that source. It bought them about a year’s head start, Softsoap ended up with one-third of the soap market and sold the brand to Colgate-Palmolive for $1.7 billion. This “strategic control point” gave Softsoap an unorthodox way to put themselves in the best position and ahead of their competition.


Moving on to the forecast, Beaulieu says that the GDP’s rate of growth is going to fall off a cliff in the second quarter. “It’s going to feel like a freefall,” he says. “Understand that it’s a reality, but notice that it is finite and the trough is not as deep as 2008 and 2009, and it rebounds to a higher peak on the other side.”


When talking about the dollar – Beaulieu says to notice there is a steep fall in the second quarter for it as well. “That’s the pain that I want you to watch out for and I want you to plan for that. But then look to the third quarter where it begins to turn the corner. And as it begins to turn the corner, it begins to take on a life of it’s own. When we’re in 2021, there is [going to be] a nice rising trend in all areas except non-residential construction.”


Looking at the Industrial Productions Index, Beaulieu points out that by 2022, the U.S. will be back to where we were before the pandemic. “We’re actually going to see manufacturing do better in the United States as a result of this. There is a reshoring going on, a move away from the dangers and troubles and issues that can happen with producing overseas,” he says. Canada and Mexico will also join the U.S. in this recovery. “The North American economy will be stronger than it was going into this.”

The economy will reach a low in 2021. Automotive sales will come back, but not all the way. The same with CAPEX spending on non-defense capital goods. “Businesses have a financial wound that needs healing,” says Beaulieu. “The forecast before this, we had ongoing growth is 2021 and 2022. Not the case anymore. The financial wounds are deep, and that means that funds will be diverted elsewhere to heal those wounds and that CAPEX spending will be slowed down.”

Next, we look at wholesale electrical and electronic goods. It will follow the same trend as non-defense capital goods, reaching a low in early 2021. “Look for your three-month moving totals to reach a low around the third quarter, early fourth quarter, and watch it begin to edge up. And as it begins to edge up, you could be doubtful,” Beaulieu concedes. “Trust the numbers. Ignore the bad news out there and trust the numbers. Lead your company by showing them the numbers, show them that things are getting better, and inspire them with the reality of leading indicators and industry trends and your company trends. Because as the numbers begin to move up, you’re going to find that their attitude changes, and things get a whole lot better, relatively quickly.”


U.S. electrical equipment new orders will decline until about mid-2021. The same is true for electrical equipment production, civilian aircraft equipment production.

“Your bright spots are housing [and] commercial construction. You’re going to have to see what your markets are doing, where they’re going, what they’re telling you. And as you respond to that, you’ll be able to place your business accordingly.”


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