As the Memorial Day turn approaches, and the warm summer weather arrives (in theory and in hope), IB conducted a survey to glean what area businesses are still worried about, and what makes them optimistic over the next six to 12 months.
Nationally, the economy appears to be turning a corner with three consecutive quarters of economic growth and two straight encouraging monthly jobs reports, but economists are still all over the map on the strength of the unfolding recovery. Skeptics cite the under-employment rate, the government’s broader measure of unemployment, which actually increased slightly to 17.1% in April and will take time to whittle down.
Our recent survey, conducted via e-mail, reflects this lack of consensus.
Innovation Edge
Paul Tonnesen, president of Fiskars Americas in Madison, listed three concerns: commodity pricing increases, the depressed housing market, and unemployment/underemployment.
Fiskars, a global supplier of home and garden consumer products, could be impacted by pressure on prices for steel, resin, and labor, which are up significantly this year compared with last year. “This puts significant margin pressure on the organization, and sometimes forces a price increase,” Tonnesen noted. “Price increases in this economic environment are not popular as you would imagine.
“The depressed housing market hurts the home builders, which has an impact on our largest retailers, and the unemployment decreases spending levels.”
On the bright side, Tonnesen indicated that innovation is paying dividends, even during the recession. The company has developed an eco-strategy that has added more value to its garden product line; its Madison location, which is where many of Fiskars’ products are designed, has produced new versions of the reel (push) lawnmower that, according to Tonnesen, addresses problems associated with old models, and rain barrels to tap into the growing market of eco-conscious homeowners.
Fiscal Policy Rescue
Gordon L. Meicher, CPA and founder of Meicher & Associates, LLP, sees both challenge and opportunity. Meicher has warned that planned tax increases that take effect in 2011 could undermine the unfolding economic recovery. “No.1, I am worried that the proposed tax increases will slow business job creation which will lessen demand for my client’s products and services,” he offered.
Optimistically speaking, a major competitor is leaving Madison, and he’s working to meet with as many of their clients as possible in order to serve them.
Nationally, he sees the economy getting a boost in the wealth that has been sitting on the sidelines. “My clients say to me, ‘How should I invest my money? When are we going to come out of this?’ The truth is, we will come out of it, and the reason we’ll come out of it is fiscally,” he predicted. “Some people bought houses for ridiculously high prices, and the truth is that other people got that money. The other people that got that money have that money in money markets, and they are sick of making one-tenth of one percent while inflation is greater.
“These people are being forced to invest their money in the stock market and because they are doing that, the flow of funds into those investments is going to somewhat drive us out of this recession. It’s not being driven by government policy, it’s being driven by fiscal measures, and the supply of money is what’s going to get us out of this.”
Obama Care
Elsewhere, the effects of national legislation are weighing on people’s minds. Peggy Lescrenier, president of Gammex, Inc., a Madison-based maker of quality control devices for medical imaging and radiation oncology, cited the recently enacted health care law. The measure placed higher taxes on medical devices, but Lescrenier noted other concerns.
“I’m in the medical device industry, and my biggest concern is simply getting through the next six months,” she declared. “The Obama health care reform plan has not given hospitals a clear road map of how they will get reimbursed for procedures. Until the provider industry can predict their income, it is reluctant, if not unable, to plan for capital expenditures, i.e., my products.
“During the economic downturn, we have invested in new product development, so when the market opens up, I should be able to capture the attention, and the sales orders, from the medical providers.”
Business Haters
Neil Fauerbach, partner-director of business development and marketing for Smith & Gesteland, is worried about government’s attitude toward small businesses. “This is where jobs are created, taxes are paid, and stability is built within our communities,” he noted. “Taxing the small business owners diminishes their ability to plow that money back into the business for expansion, more jobs, etcetera. This is not a business loving city or state.”
Fauerbach’s sense of optimism is directed toward improving the sense of focus among business clients. “We tell clients that 80% of everything they do thorughout the d ay is poorly conceived, poorly executed, and largely beside the point of their mission,” he stated. “When companies understand that, they become more efficient. It is fun to see.”
Public-Private Option
Others are leaning on public-private partnerships, a way to leverage resources in good times and bad. With increased enrollment and decreased state aid, Bettsey Barhorst, president of Madison College (formerly Madison Area Technical College), said the institution is still training displaced workers for re-entry into the workforce. In addition to providing families with an affordable bachelor’s degree option, the college needs to maintain modern facilities for technical training and competition in the global market.
“Strong community partnerships assure me that we’ll get through these challenging times together,” Barhorst noted.
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