MERRILLVILLE | Business owners who are even contemplating an investment should put aside any lingering reservations and act now, according to a leading economist.
Jeff Korzenik, chief of investment strategies for Fifth Third Bank, said it’s a good time to expand a business or make a large capital investment as the economy continues to recover.
“For the business owners and decision makers, labor is tight and capital is old,” he said. “If you’re even thinking about refreshing your fleet of vehicles or updating and expanding your machinery, you should consider making that investment today. In the economy, delivery times are stretching out and the cost of financing a capital investment is going up. It’s not a bad time for equity investment. Interest rates are low, and sitting on cash yields nothing.”
Korzenik delivered the remarks while addressing a crowd of bankers and business people at the Radisson at Star Plaza in Merrillville, at an event sponsored by the Northwest Indiana Forum last week. The economist is an executive who oversees investments for the Cincinnati-based regional bank, which has $144 billion in deposits and more than 2,200 employees in Chicago and Northwest Indiana.
Volatility is normal in any economic expansion, so business leaders should not overreact to any bad news, because things are trending up, Korzenik said. About 60 percent of purchasing managers just reported seeing improving conditions last month.
“It’s a positive reading that shows things are getting better,” he said.
Nationally, unemployment has fallen to 5.9 percent. The long-term unemployment rate is coming down very quickly, and it should soon drive wages up as hiring becomes more competitive, Korzenik said. The number of workers willing to quit their jobs because they’ve lined up a new one or are optimistic they can find another has normalized for the first time in years. Employers, however, are still having trouble finding qualified job candidates.
“Bank customers have been consistently telling us, particularly in the transportation and manufacturing sectors, they would like to hire but are having a hard time finding anyone who can pass a drug test,” he said.
“It’s increasingly a big issue. The plural of anecdote is not data, but it’s what we’ve been hearing in Atlanta, Charlotte, Michigan, Illinois and Ohio. It seems to be a representative trend.”
But overall economic growth is evident, as business owners are exercising more pricing power, such as by raising prices for hotels and airfare, Korzenik said. Higher prices at restaurant chains and big-box stores that typically underperform in tough economic environments show the pace of economic growth has turned decidedly positive.
In recent decades, business managers have shifted focus from pricing power to controlling costs, but the unprecedented energy boom in the United States and the rise of living standards in developing nations has closed the cost gap to the point where the United States should be able to win back some of the manufacturing that had been exported overseas.
Other long-term trends bode well for the U.S. economy, including a rising birth rate that should buoy single-family home sales well into the next decade, Korzenik said.
In the short term, low crude oil prices of between $80 and $85 per barrel mean consumers spend less on gasoline and have more money in their pockets. Such low prices also insulate the overall economy from a disruptive spike in oil prices that could occur because of the unrest in the Middle East, he said.
The U.S. economy also continues to innovate, such as with driverless cars, the internet of things, and drones that have delivered six-packs of beer to people ice fishing in upper Wisconsin. Technological innovation has allowed more and more vehicles to shift to low cost natural gas, and the more widespread adoption of a lower cost fuel could boost the economy as much as the conversion from whale oil to kerosene did in the 19th century.
“The pessimist is considered smart, but history is on the side of the optimists,” he said. “There’s reason for optimism because good things are happening in the U.S. economy.”
The article can be found at: http://www.nwitimes.com/business/local/economist-says-conditions-ripe-for-business-investment/article_ecd97593-8688-5f6e-8533-bf21f2c710eb.html