WHAT LIES AHEAD: Thoughts on Industry and the Economy in 2018

The Curious Conscious Capitalist podcast presented by Conscious Capitalism Chicago
The Curious Conscious Capitalist podcast featuring Jean Pitzo
December 19, 2017

To be continually successful, companies must be cognizant of market trends and how the economy can affect them. We can look to the country's Gross Domestic Produce or GDP to get a glimpse into how the economy will perform in the future.[i] GDP is everything people and companies produce in a country.[ii] According to Kimberly Amadeo at www.thebalance.com, the GDP growth rate should remain in the ideal range (2-3%), unemployment to stay at the natural rate, and inflation and deflation will remain ideal.

While 2018 is likely to be a prosperous year, irrational exuberance in the stock market can signal a business cycle's peak, meaning a recession is likely two to three years down the road.[iii] However, during 2018 manufacturing is expected to grow faster than the general economy.

ACE is fortunate to work with clients in the growing Food and Pharmaceutical Processing and Packing industries - both of which are expected to see significant 'movements' in 2018.

Trends of particular interest affecting these industries include:

Food Processing + Packaging

Increased GMO awareness - With more and more people becoming concerned with what is in their food, Dave Fusaro at www.foodprocessing.com recommends food-processing companies jump out ahead and embrace GMO labeling. Genetically modified organisms have become a hot button issue. Rather than trying to hide that your food contains GMOs, educate the public on why the food is safe and assuage their fears.

Glyphosate-free labeling - Similar to the GMO-awareness, glyphosate, the most frequently used agricultural chemical, is increasing in concern for consumers. While not proven, Glyphosate has been "linked to everything from allergies to autism" and "the World Health Organization has labeled it as a probable cause of cancer."(foodprocessing.com) With 93 percent of people tested by the University of California at San Francisco, glyphosate has been turning up in unexpected places.

Increased globalization - Globalization is likely to increase across the entire consumer products industry, including food processing, in an attempt to take advantage of emerging markets.[iii] Companies are either purchasing companies with footholds abroad, (like Amazon with their Whole Foods acquisition, which has stores in England) or looking to expand their reach across the world.

Pharmaceutical Processing + Packaging

Tighter regulatory practices - While most economists agree that the pharmaceutical and medical device production field will see an increase in 2018, there is doubt whether this trend will continue in 2019.[iv] The pharmaceutical industry is seeing stricter laws globally, especially in North America and China. If legislation is passed that gives the U.S. Department of Health and Human Services the ability to negotiate Medicare drug prices, it could lead to an uncertain impact.[v]

Increased life expectancy - Medical advances, increased dedication to health consciousness, and improved healthcare have led to an increase in life expectancy.[v] With the increase in people 65 and older, there will be more people overall, and specifically a larger portion of people who are highly likely to use prescription drugs.

Patent expirations - Some very common and profitable drugs have patents coming up for expiration. This will see competitors develop low-cost alternatives, which will increase the total number of drugs sold.[v]

Metal Forming + Fabrication

The metal forming and fabrication industries are also expected to see growth. 2018 spending is projected to be more than $2.7 billion, 20% higher than the forecast than 2017. With technology rapidly advancing, many shops are buying new equipment to increase production and to help scale up capacity.[vi] In 2018, ACE will be purchasing and installing a fiber laser.

Overall the economy is predicted to grow throughout 2018. There are long-term concerns regarding stock market trends, which may dampen investor enthusiasm in 2019 to 2020. Hopefully, with awareness of economic trends and their correlation to the pharmaceutical and food processing fields, we can make the best decisions today to help us prepare for tomorrow.