Everything's in place for a good year

By Jerry Tuft President, Lock Division Schlage Lock Co.

I FTERthree

Ilyears of recurring recession and aborted recovery, the expansion of the construction markets that took hold in the middle of 1982 looks like the real thing this time.

Building activity, activity, however, is up be- cause interest rates are down and this is an important qualification. Demographics certainly support an upturn in housing, but the cost of money remains a key in the short term. Dr. Paul Volcker's reappointment was critical. Experience shows that recovery based on a sudden switch of monetary policy can be turned off as suddenly as it is turned on, butVolcker is a known entity and his moves can be anticipated, which provides an underlying confidence in the recovery.

So, what does all this mean for the business climate in 1984, and in particular for building products? There seems little doubt in anyone's mind that the economy's recovery is now firmly established and for once all the analysts seem to be in agreement. We are on the upswing through most of 1984, and continued growth should steadily absorb excess capacity and gradually reduce unemployment. Inflation will creep up, but not outside the $6Vo range, and increases in real disposable income and consumer confidence are good signs for the retail in- dustry. As far as housing is concerned, with long term interest rates settling into a period of relative stability (mortgages around l3-l4s/0, although likely to move up and down a half point or so from time to time), we should see another year of 1.7 to 1.8 million unit starts.

The market for d-i-y has got a lot going for it in 1984. With sai-es of existing homes up, plus more cash available to the householder, the outlook is fairly bright. Everywhere there are indications that the consumer is getting smarter and smarter. Value is important, but so is quality. Because of ever increasing concern for personal security, consumers are looking for the reputable, high quality products to fill their needs in that area, and are prepared to pay the price for them. Value is the watchword.

The outlook for remodeling is also encouraging. Socially it is becoming very acceptable to take older buildings and renovate them. People no longer want to knock down the existing structures and replace them with modern edifices. This trend, of course, is further strengthened by tax advantages and state and federal sup- port. The interesting thing about remodeling is that it spans the whole sp€ctrum from the single family home to major urban redevelopment schemes. Most of it is fast track type work and can bring good margins for both the contractor and his supplier.

Story at a Glance Economy on the upswing in '84. . .consumer becoming value conscious. .remodel. ing on fast track. .increased aggrcssive pricing, merchan. dising. ..more promotion ac. tivity.

There are several implications for the manufacturer, wholesaler and retailer. The critical thing to look for in 1984 is competitive activity; pricing will be aggressive at all levels in the channel and merchandising will become paramount. Look for increasing promotional activity, rebates, free gifts, special values and offers, and, of course, a growth in coop advertising.

Overall, 1984 should be a year of optimism. Traditionally a presidential election year brings with it an increase in business confidence and stabilitv. Recovery is established, but we aren't in an industry that will support complacency. It is a growing but aggressive and changing marketplace. To quote from Naisbitt's "Megatrends," the one thing that is certain about the future is that it will not be the same as the past. We are in a dynamic environment, those of us that face the challenges and changes and are able to adapt most quickly to the needs of our marketplace will be the successes in 1984 and beyond.