We are now halfway through 2019. You are likely super busy getting work done and managing your business, and you may think you have no time to read an article. However, it appears there are some potholes in the road ahead.
Economic indicators are pointing to a coming slowdown. Not all sectors of our economy will be affected the same; by far manufacturing of durable goods, especially autos, look to take the biggest punch. Generally, the experts I trust predict a “Soft Landing” slowdown for most sectors, which means a period of 2-4 months of low growth. For the overall economy growth will be below 1% during the slowdown.
No reason to panic or make knee-jerk moves. This will be a short downturn and should be relatively painless for companies that have good customer relationships and stable staff. The real question is . . . . How will you make hay in the following upswing?
Mild slowdowns offer opportunities for companies working a long term plan and have the money to jump out ahead. For example; this slowdown might encourage an older operator to sell at a value price. In addition, some owners may panic and layoff staff so you might be able to pick up some good employees. Or some expensive equipment you need might sell at a reduced price. Choose not to participate in the slowdown, instead prepare for the next upswing!
In some ways the slowdown has already started. For most it will be a late 2019 event, possibly lasting into early 2020. That means the worst will be after our season is winding down and hopefully over with by the time spring hits. Perhaps we’ll see slower spring job sales until people feel confident to invest money into their landscapes. My hope is the slowdown is so mild, most people don’t even notice.
Even though this slowdown is not expected to impact the consumer sector, retail sales may feel a pinch. If you have a garden center or supply retailers, invest with caution and guard your cash. In addition, labor will continue to remain tight because there are so many jobs left open right now. Make sure your staff relationships are good!
Here a rundown of the growth or decline in construction sectors:
- Single Family Housing: This year so far the numbers are -0.8% lower than 2018 and is predicted to finish 2019 at -2.1%. Rebounding expected toward year-end or early 2020 and rise at least through 2021. Keep your people, look for some commercial work if you need more job revenue.
- Multi-Family Housing: To date is -2.3% lower than 2018 with expectations of being -9.2% at year-end. Nationwide this sector is not expected to have positive growth in 2020 either. Growth will start again in 2021. HOWEVER: the Midwest is doing much better! In fact we’re technically in a growth phase. Finally some good news for us Midwesterners! If this sector is big for your business, seek jobs in the commercial sector to fill in.
- Private Offices: are up +9.4% over 2018 and expected to hold at that level for the year. 2020 will be a flat year with slight growth, maybe +0.3% until rebounding sharply in 2021. In fact experts say we could see record breaking levels in 2021. Keep winning jobs and hold onto your labor!
- Education: Up +4.5% from 2018 and expected to finish the year at +7.5%. Slower growth is expected for 2020. Somewhere around +1.3%. Long term: a lot of designs on the architect boards point to a decent growth in 2021. Stay the course if education is a big client base for you.
- Hospitals: Up slightly over 2018 at +1.7%. However, jobs are becoming fewer and predictions say we’ll end at -3.0% growth for the year. Not much better in 2020 with 2021 showing good possible gains. If medical facilities are your thing, for the next year or so watch your costs and plan for growth elsewhere.
- Manufacturing: Up +1.6% and expected to end the year at +13.5%! But 2020 and 2021 will be flat. This is not a huge sector for landscape trades.
- Multi-Tenant Retail: Down -17.4% YTD. Yuck. Pick-up begins soon and the sector ends up +0.8% for 2019. Next year is looking real good with predictions of +6.5% growth.
- Warehousing: As of now we’re up +9.8% and will end the year at +11.4%. Expectations are for +11.8% in 2020 and +7.1% in 2021. Great performance, but warehouses are not that big of a revenue source for landscapers.
Bottom line; Don’t panic, seek opportunities, keep your people.