ING MATERIALS

By Jim Daniels President Plunkett-Webster, Inc. And President North American Building Material Distribution Association

Despite the slow GDP growth of the second quarter, the long-anticipated slowdown in the U.S. economy remains, in my estimation, mostly a forecast, not reality. Higher interest rates and the associated decline in mortgage applications signal slower growth ahead, but these leading indicators have very long lead times and do not support a near-turn weakness.

With a few exceptions, there has been little evidence of significant slowing in the economy. Despite higher mortgage rates, both new and existing homes sold at record levels over the May to June period. This bodes well for continuous growth in consumer spending, since home purchases usually set in motion a stream of spending on paint, carpeting, appliances and furniture.

Inventory accumulation should increase for the rest of the year, with strong imports reflecting healthy consumer demand.

Japan and East Asia's growth has exceeded expectations and is viewed as evidence of recovery. However, recovery in Japan is likely to be neither smooth nor rapid. Booming demand for imports by U.S. consumers will account for much of the resurgence of growth in the rest of the world.

The U.S. economy seems to be stubbornly strong despite many a doomsayer predicting the end is near. We see our customers looking ahead to a continued strong economy rather than looking over their shoulder, waiting to see the curtain drop as winter sets in. However, dealers are far more aware of inventory condition, and therefore look to their suppliers/distributors to ship smaller orders more frequently.

We feel that the first six months of 2000 will be a continued strong cycle for building materials. As the national election draws near, the economy most likely will maintain itself through very strong political venues. Most fellow distributors with whom I have talked, however, have a strategic plan that will be quickly activated if the economy does not live up to their expectations. After going through the transitions in the late '80s and early '90s recession, most people are better prepared to deal with the downturn, not if it occurs, but when it occurs.