Only two more weeks and 2019 will be in the history books. One thing that impressed me about 2019 is that, despite many challenges, the majority of door and window manufacturers had a great year with growth at least in the single digits and some in double digits. A few of my customers made some changes that resulted in lower sales numbers, but some of these same companies somehow managed to grow profits mostly by shedding less profitable segments of their businesses. Yes, who wouldn’t want to work less and get paid more?

So, what’s in store for 2020? Can we keep growing sales and increase profitability? What could possibly stand in our way?

The Good

The housing market and the general economy are both strong going into the new year and are expected to remain so. This month, Home Builder Confidence jumped five points to its highest level since 1999, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

Homebuyer demand is dependent upon interest rates on mortgages. Many experts are forecasting that mortgage rates will remain low in 2020 with many predicting 30-year rates at 3.7%. If these predictions hold true, then the new construction markets will remain strong and so will sales of doors and windows.

What about the unemployment rate? It also affects the housing market. As long as the economy remains strong, then job creation should follow. Goldman Sachs predicts that the economy will grow faster in 2020 and that unemployment will be at a 70-year low. According to the Goldman Sachs report, economists working at the Federal Reserve Bank feel that the risk of a recession in 2020 is only one-in-five. Earlier in 2019, the bank’s economists had it at one-in-three.

The Bad

Because unemployment remains so low, it will remain very difficult for window and door companies to find skilled labor. Just about everybody who wants to work is already working. Combine this with the trend that American workers are falling out of love with the manufacturing sector, and it will be another tough year on the production floor.

So, will more door and window fabricators turn to automation as the answer? Absolutely yes.

Will investment in automation have an immediate impact? Only if you ordered it eight months ago!

You see, most automated equipment is made to order, and lead times are running six to ten months. This same shortage of skilled labor also affects the housing market as homebuilders struggle to build new properties at the normal pace. So, the poor labor market is the proverbial monkey wrench!

The Ugly

Despite the mostly optimistic predictions for the economy in 2020, there is the possibility of unknown or unexpected factors coming into play that could cause a significant downturn. Neil Irwin describes some interesting scenarios in a recent New York Times article How the Recession of 2020 Could Happen. He brings up some interesting factors among them the fact that many corporations are becoming more heavily leveraged which makes them more likely to resort to layoffs should the economy soften.

As he explains, “Businesses have taken on more debt in the era of low-interest rates, which leaves them more vulnerable to failure if the economy were to soften or interest rates to rise.”

I love how Irwin gives credit to the impact of the press. He talks about possible turbulence in global markets but also goes on to say that “news reports attached to that turbulence could reduce consumer confidence and lead Americans to pull back on their buying.”

It really makes one ponder the role and impact that the press plays in areas such as politics and the economy!

So, as we count down the final days of 2019 and kick off a new year, let optimism prevail. The door and window industry had another great year and there are many reasons to look forward to an even better year in 2020. On that note, I would like to wish our [DWM] readers a fantastic Christmas and a Happy New Year!

1 Comment

  1. “It really makes one ponder the role and impact that the press plays in areas such as politics and the economy!”

    I strongly agree that perception can be more important than reality when it comes to consumer confidence. We live in a reality where there is simply too much information and, worse yet, opinion disguised as fact. However, I don’t blame this on the press. Our politicians have become more media savy and no longer see facts as their basis for communication.

Leave a Reply

Your email address will not be published. Required fields are marked *