2014 Will Be a Good Year for
Business Growth and Trade Shows
Oceanside, CA – What trends will define the economy in 2014? Last year was highlighted by lackluster employment, a government shutdown, the Federal Reserve’s taper talk, and slowing worldwide economic growth. Will 2013’s trends spill over into the new year or will there be a change in direction? Most importantly, what potential impacts to the trade show industry should we prepare for?
The average recovery since World War II is just under five years and the record is ten years during the 1990s. Currently, the U.S. is in the middle of the fifth year of recovery since the Great Recession ended in June 2009. Most recoveries end when the economy creates excesses or bubbles that often trigger a contraction. “That doesn’t describe this recovery — it’s not even close,” said Frank Chow, chief economist for Trade Show Executive Media Group. He noted that GDP averaged only 2.4% during the period and 2013 is projected by the Fed to grow between 2.2% to 2.3%. Most economists are predicting a modest increase of about 2.5% to 3% in 2014.
“Although many people in our industry, including me, have been disappointed at the anemic performance of the economy during the recovery, I’m beginning to have a different perspective,” Chow said. “If the U.S. economy stays the same and grows 2% to 3% for the next five years, would that be a bad thing?,” Chow asked.
Chow pointed out that the world is very different now than before the Great Recession and is undergoing massive changes, specifically:
- Governments in the Middle East and Africa have been toppled and are still struggling for stability.
- War between Iran and Israel has been imminent for years.
- Remember Greece? It triggered a continent-wide recession that threatened to dismantle the Euro and the European Union. Many countries have implemented severe austerity measures to survive a financial collapse.
- Japan experienced an unprecedented natural disaster in 2011 and its repercussions are still being felt.
- In November, a typhoon crushed the Philippines, killing over 6,000 people and forcing 4 million from their homes.
- China had to ratchet down its government stimulus to avoid a huge real estate collapse and is currently in transition from an export-dominated economy to one based on domestic consumption and productivity.
By contrast, Chow noted that the U.S. has been leading the global economy with growth of about 2.4%. “It’s paltry, but considering the dysfunctional government, deteriorating infrastructure, lagging education standards, and skyrocketing public debt, 2.4% growth can be viewed as amazing,” he said. Maybe we should be asking: What are we doing right? Chow said the U.S. has the best and most innovative companies in the world and our free enterprise system allows them to flourish.
Business Spending is the White Knight
During the Great Recession, U.S. companies, large and small, were quick to lay off employees, reduce debt, and embarked on a fierce cost-cutting campaign for survival. Within two years, business spending led the U.S. out of recession and into recovery. “Today, corporate balance sheets are the strongest they have been in decades,” Chow pointed out. “Small businesses have not fared as well mainly due to more restricted credit availability,” he said, “but compared to the severity of the recession, they are surprisingly stable.”
But cost-cutting is only part of the story. New technologies and social media have emerged, allowing companies to become more productive and expand their markets. “Perhaps the signature achievement during this slow growth period is the startling innovations that are changing how we conduct business,” Chow said. He noted that rapid change is happening in manufacturing, bio-medicine, oil & gas drilling, media & entertainment, transportation, and infrastructure just to name a few. Here are two examples that will soon find their way into exhibitions:
- 3D & 4D printing, using laser printers to make three-dimensional objects from digital designs. The technology has advanced so much that it is becoming available and affordable to individual consumers. Many companies are starting to use them in production and are cutting costs dramatically. 4D uses different malleable material (smart ink) that can adapt over time to achieve results previously thought impossible. One application being tested is a programmable water pipe able to expand and contract to replace the 77-year old pipes in Washington, DC.
- Robotics are developing at hyper-speed. Intuitive Surgical makes medical robots able to perform sophisticated surgery. Taiwan’s Foxconn Manufacturing, assemblers of iPhones and iPads, plans to deploy 1 million robots in the next three years to displace some workers — 30,000 have already been built. Bill Gates said robots will be the next world-changing industry and backed that up by launching a new studio devoted solely to creating software for robots.
Four Key Trends
Chow identified four trends for 2014 that could converge into a critical mass, expediting the applications of those innovations. “If these occur even on a small scale, economic growth in 2014 will surprise on the upside,” he asserted. Most companies are no longer in the cost-cutting mode and have plenty of cash. The main economic uncertainty was when the Fed taper would begin. “Now we know that tapering will start in January 2014 and the stimulus will likely end by late 2014,” he said. Chow warned that interest rates are highly likely to rise. However, these four trends may more than offset the higher rates and propel the economy forward:
Trend #1: A more cooperative Federal government. Why? The swift and quiet two-year bipartisan budget deal passed by Congress in December is early evidence of this trend. The deal restored most of sequestration cuts. Also, the battle over ObamaCare is transitioning to the courts. We won’t know the full impact of the new health care law until later in the year since the President delayed the employer mandate until 2015. There will be congressional elections in November, and the bitter divisive rhetoric should moderate as the year progresses, increasing the possibility of a more permanent agreement on the federal debt ceiling. Any improvement in this area will reduce uncertainty, which has been holding back the economy.
Trend #2: Energy costs will be stable, barring any war in the Middle East. U.S. gasoline prices dropped significantly at the end of 2013 due to the shale oil revolution in certain parts of the country. U.S. energy independence is a boon for industrial companies. The Boston Consulting Group (BCG) says cheaper energy gives U.S. industry a solid competitive advantage over Europe, Japan and emerging markets. U.S. oil production last October exceeded imports for the first time in 18 years, according to the U.S. Energy Information Administration. This trend is expected to be long-lasting: U.S. oil output is projected to top Saudi Arabia's by 2016.
Trend #3: U.S. manufacturing will experience a renaissance soon. "The U.S. has become much more competitive," says Savita Subramanian, equity strategist at Bank of America Merrill Lynch. "It's bullish for the U.S. and even more bullish for companies outside of the U.S. that can come here and improve their own margins." Ironically, the Chinese economic boom has boosted wages and production costs to where China’s advantage has greatly diminished. As a result, the U.S. has emerged from the recession as a low-cost, high-quality manufacturing base. Lower energy costs have contributed greatly to this trend. U.S. companies operating in China are increasingly finding that returning jobs to the U.S. is more economical and stable. Direct beneficiaries include U.S. makers of computers, electronics, electrical equipment, appliances, furniture and plastics.
Trend #4: Tech spending will likely pick up this year — big time. This is a B2B trend. With global economies improving, there is an urgent need for companies to upgrade technologies to avoid security and compliance risks, and to stay current and competitive. Tech analysts at Credit Suisse estimate a boom in tech spending for the next four years as corporations start spending their $1.5 trillion cash to purchase new software, servers, tablets and PCs. Additionally, technology research firm Gartner predicts growth in enterprise tech spending will rise 3.6%, more than double the 1.7% in 2013. Gartner predicts it will keep rising, increasing 4.1% in 2015 and 4.2% in 2016. Moreover, CB Insights, a leading source of venture capital data, reports there are 390 Internet companies on the Tech IPO pipeline for 2014, a 39% increase over 2013.
When these trends materialize, Chow believes it will have a synergistic effect on job creation. The prospects for trade shows should be beneficial in terms of attendance and exhibitor growth later in the year. Travel costs will stabilize. Social media will play an increasing role in business purchases, and expand the awareness and application of the innovations occurring throughout a broad spectrum of industries. This should also increase business investment in trade shows.
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