Koropeckyj notes that recent federal surveys show businesses would like to pick up spending. “The average of the five surveys that ask this question about investment intentions six months hence has risen notably this year, more than doubling to a one and a half year high.”
A continuing low interest rate environment should encourage that spending. “Interest rates have fallen in the wake of the Federal Reserve’s decision not to taper asset purchases,” says Koropeckyj.
Uncertainty Still Rules
So why haven’t businesses already been investing all their accumulated capital? The culprit: uncertainty. Business leaders are not sure about the future. They do not have a firm grip on what will happen with federal legislation or about the health of the economy.
“Uncertainty about and impact of government policies is a big concern for businesses,” says Koropeckyj. “According to the survey of National Federal of Independent Businesses, concerns about regulations, such as environmental legislation and the implementation of the Affordable Care Act, have surpassed weak demand as the main concern of businesses.”
That same uncertainty seems to feed into the sluggish state of what manufacturers call “backlog,” or sales placed for future delivery.
“Manufacturers keep telling me ‘my sales are pretty strong but my backlog is much weaker,'” says Michael Smeltzer, director of the Manufacturers Association of South Central Pennsylvania, a trade group whose members employ some 200,000 workers. “This has been going on for three years. Profit margins are OK, but backlogs are not strong enough to encourage manufacturers to make decisions.” Hence the hesitation to spend accumulated corporate cash.
And what’s causing the sluggish backlog? The same uncertainty about the future — this time in the minds of manufacturers’ customers.
“Customers are putting off investment decisions until the very last moment,” says Smeltzer. “A customer will make a call and say, ‘I need five widgets and I need them tomorrow.’ Five years ago he would have called six months in advance.”
Absent a robust backlog, manufacturers tend to put off investing their hard-earned cash. The result is a sluggish selling environment that ricochets through the economy — all the way to the retailer’s cash register.
Rebuild and Grow
Absent any lingering softening from the recent federal fiscal crisis, economists expect a general lifting of spirits and overall revenues in the coming year. So how can you move your own integration business into a profitable 2014?
Keep building relationships while economic trade winds build. “2013 was a building year,” says Simson. “After the shock we experienced in the period 2008 through 2010, it was almost as if we had to rebuild our businesses and our consumer relationships and make connections all over again. This year there is more confidence, and demand is growing incrementally.”
As for making the right decisions to thrive, Simson suggests working your plan and keeping the faith. “There’s no seat belt to strap on,” says Simson. “If we take our individual growth and expansion projects one at a time and put them in place thoughtfully, good things will come.”
