IHEA Monthly Economic Report: It's Not the 1980s

Rather than mirror the doom and gloom projections from the media, this economic report does not project the 1980s to our present situation. The monthly Industrial Heating Equipment Association’s (IHEA) Executive Economic Summary released in May remains proactive, warning against statements of doom and gloom, while recognizing three very real drivers of economic concern: inflation, labor, demand.

“[The] data for the new orders index has actually improved a bit and is nearly at 60. That is clearly expansion and growth and when this is taking place with
new orders the influence on the overall economy is very positive.”

“The bottom line is that economists are about as reliable as meteorologists when it comes to predicting,” the report reads. So rather than perpetuate the gloomy forecasts, the report proposes warnings in several “if” statements: “If the inflation doesn’t come down, if the price of energy stays high, if the supply chain remains broken, if labor is in short supply, if the pandemic surges again, if the Ukraine war doesn’t end.” These factors may not change fast or fast enough, but we will cross that bridge when we get there.

“Watch for a rethink of tariffs on imported steel and aluminum. Most of the relaxation will affect European producers as there is not much enthusiasm for lowering tariffs on China or other Asian producers.

The first driver of economic concern is consistent with the report released in March: inflation. Currently, the two reasons can be attributed to war in the Ukraine as sanctions on oil have been placed on the third largest oil producer, and supply chain breakdown due to the pandemic. The latter continues to be exacerbated as China has gone into fierce lockdowns. “The loss of the world’s third largest oil and gas producer,” the report continues, “sent prices spiking and there was a similar reaction when it comes to food as this part of the world produced 25% of the world’s wheat.”

The second driver is also familiar — the need for labor and combatting labor costs. While not unanticipated, the increasing demand for skilled workers indicates that we have not properly prepared for this need. In fact, the report asserts that “[there] has been no concentrated effort to train the needed workforce, no reform of immigration, [and] no move to change the retirement age.” This means that skilled employees have more bargaining power as companies — not workers — compete to meet their need.

Anne Goyer, Executive Director of IHEA — Anne Goyer
Executive Director
IHEA

Lastly, the driver of economic concern is high consumer demand in a time of shortage. “In a time of shortage, people and businesses hoard, and that only makes the overall situation worse,” reads the report, and even though the “flood of money” offered to people during pandemic recession fueled excessive growth — nearly 6% — the overhang is mostly gone. There is still some remaining, despite inflation, to encourage spending; it is this area of demand that the Federal Reserve can directly affect if it so chooses.

Check out the full report to see specific index growth and analysis which is available to IHEA member companies. For membership information, and a full copy of the 11-page report, contact Anne Goyer, executive director of the Industrial Heating Equipment Association (IHEA). Email Anne by clicking here.