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Forecasting is difficult....

Putting things into perspective can sometimes be a full time job, particularly at this time of the year. You see, it's forecast time. That period of time when almost every business and industry wants to know what's ahead for the coming year.

One immediate response might be, "Your guess is as good as mine." But if you're the one responsible for having the information and getting it out, chances are that retort probably won't go over too well. And so we try, knowing full well that it's pretty much a thankless job.

Economic forecasting is kind of like writing editorials. Having an opinion is one thing, but putting it down in black and white for thousands of people to shoot at is another thing altogether.

For example, a couple of years ago I heard one prognosticator project some fairly serious times ahead for the foundry industry. He based his projections largely on the new casting capacity coming on line at the time and alluded to another early 1980s scenario.

If you were around back then, you'll know what he meant. During the late 1970s, the U.S. foundry industry was bouncing right along shipping 20 million tons or more per year and adding more capacity. By 1982, it was more than a little obvious that the industry wasn't bouncing anymore, just dropping. Within the three-year period between 1979 and 1982, casting shipments were cut nearly in half. By any definition, we were mired in a deep depression.

But during that period, the signs were all around us that this wasn't going to be your short-term recession.

Raw steel production between 1979 and '82 plummeted from 136 million tons to 75 million tons. Passenger car shipments fell from nearly 8.5 million in '79 to about 5 million by 1982. Shipments of railroad freight cars plunged to 6000 in 1983 from 90,000 cars in '79. Housing starts also fell off the map during that period.

There are just no signs that changes of the magnitude of the early '80s are shaping up. In fact, much of the capacity added by foundries during the past few years has been largely offset by the closing of captive casting capacity. During the past two or more years, the industry in general has been operating at just about 80% of its capacity - a very healthy level. But, in looking ahead, there are some mixed signals.

On the positive side, since World War II, the average length for a continuous economic expansion has been 4.25 years. As we begin 1997, the U.S. economy is well into its sixth year of continuous growth with little or no let up seen on the near term horizon.

At the same time, while this has been one of the longest economic expansions on record, it is by no means the strongest. The 1996 Gross Domestic Product is expected to rise by a less-than-robust 2.3% for the year. Again, some experts insist that this is OK too, since the slow but continuous growth has helped check inflation and has kept the economy from overheating.

Another positive sign has been employment. Through the first two quarters of the year, employment in the U.S. rose to 119.25 million, up 2.5% when compared with the same period a year earlier. Building permits also rose 13.3% to 410,463.

At the same time, some economists are sending up some caution flags. They point to the enormous growth in consumer spending and rising credit card debt. Through the first three quarters of '96, retail sales grew to $2.494 trillion, up 6.4% from the previous year. Some also raise the issue of "automobile affordability" as an important factor to watch. In 1975, for example, 22.3 weeks of median family income was required to purchase a new vehicle. By 1995, this had risen to 29 weeks.

How do read these trends? How will these and dozens of other factors affect your business? That's really the bottom line, isn't it? While we can give you overall industry trends, as we have with our forecast in this issue of modern casting, it still all comes down to knowing your customers and knowing your business.

You see, after all is said and done, Victor Borge was right. "Forecasting is difficult - especially about the future."
COPYRIGHT 1997 American Foundry Society, Inc.
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Copyright 1997, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:foundry industry
Author:Kanicki, David P.
Publication:Modern Casting
Article Type:Industry Overview
Date:Jan 1, 1997
Previous Article:Steel casters examine melting practices and metal processing.
Next Article:Solid casting markets fuel 1997 expansion.

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