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January '20

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18 • RV PRO • January 2020 rv-pro.com A slowing economy. Costly tariffs. Brexit angst. A presidential election. A shaky stock market. Rising labor costs. A looming recession? And happy consumers. Those are the ingredients of a mind- bending cocktail of economic uncer- tainty now eroding business confidence and capital investment. Despite a state of full employment, robust consumer spending, low interest rates and a strong housing market, forecasters are predicting a challenging operating environment in the year ahead. Slowing Growth "We look for the economy to grow below its potential in 2020," says Sophia Koropeckyj, managing director of industry economics at Moody's Analytics, a research firm based in West Chester, Pa. "Corpo- rate profit margins have been compressing noticeably as growth in labor costs has out- paced revenue growth. Shrinking margins are often associated with late-cycle expan- sions and often cause businesses to be more cautious in hiring and investment." Moody's expects the nation's gross national product (GNP) to slow to 1.7 per- cent in 2020, down from a more normal 2.3 percent anticipated when 2019 numbers are finally tallied. The 2019 performance is a decline from the 2.9 percent growth clocked the previous year. (The GNP, the total of the goods and services produced by a nation, is the most commonly accepted measure of economic growth.) Strong Hiring Reports from the field reinforce Moody's calculations. "In the last part of 2019, concern about tariffs resulted in a slowdown in the automotive and agricultural sectors, and a lower level of orders caused some companies to reduce their size," says Tom Palisin, executive director of The Manu- facturers' Association, a York, Pa.-based regional employers' group with more than 370 member companies. With its diverse membership in food processing, defense, fabrication, and machinery building, Pal- isin's group can be seen as something of a proxy for American industry. Despite the slowdown, says Palisin, most of his members continue to enjoy good profits and to hire when they can find the right workers. That success, though, is tempered by a year-long gradual decline in the lead time required to fulfill orders – a common indication of decelerating reve- nues throughout the supply chain. "Manufacturers experienced signifi- cant lead time in the first quarter of 2019 as a result of high demand and capital spending," Palisin says. "Lead time short- ened as the year progressed, to what is now an average level. We expect lead times to remain average in 2020, due to headwinds that may moderate economic growth." Happy Consumers The current economic picture is not lacking bright spots. The most pronounced is a consumer who seems largely contented with the way things are working out, thanks to healthy employ- ment levels that are filling pockets with spending money. That's important, because consumer spending is a powerful driver of business activity, representing some 70 percent of the nation's economy. The unemployment rate was running at an enviable 3.7 percent toward the end of 2019 – well below what many economists label as "full employment." Employers have been consistent in their hunt for workers to fill a growing number of positions. "Monthly job growth has been more than enough to keep up with the growth in the working-age population," says Koropeckyj. While employment trends are positive and interest rates are low, experts say businesses face economic headwinds going into the new year, as the economy deals with fallout from the tariff wars and a slowdown in business activity. By Phillip M. Perry S PEC I A L S EC T I O N O U T LO O K 2 02 0 Outlook Turns Cautious for 2020

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