U.S. Uptick Holds Into Second Quarter

Positive Outlook Continues

By Alan Beaulieu

Q. What’s better than an economic uptick?
A. One that keeps on ticking.

That’s the positive economic situation GAWDA member businesses (and the rest of the country) find for 2017’s second quarter, the latest ITR for GAWDA Industry Analysis Report shows.

ITR Economics, a renowned economic analysis and forecast fi rm headed by GAWDA Chief Economist Alan Beaulieu, began providing the reports for GAWDA in the first quarter of this year. The latest analysis and forecast is presented on the next several pages.


Welcome to the second GAWDA Industry Analysis Report provided by ITR Economics. We are pleased to present this quarterly snapshot of the overall U.S. economy, and even more importantly, customized content developed specifically for the member companies of the Gases and Welding Distributors Association. Our goal is to provide members with the insight needed to create confidence and
drive practical and profitable business decisions

In this analysis, you will see terms such as “rates-of-change” and “phases of the business cycle.” We encourage you to review the terminology and methodology segment of this report (on page 77) to ensure you receive the full benefit of the information being provided.


Here is ITR Economics’ macroeconomic forecast for 2017 and recommendations about what GAWDA members should do about it.

  • Economic expansion in 2017 will provide growth opportunities for GAWDA members
    • Consider expanding margins by increasing prices in order to maximize profi ts during this period of rising demand.
    • GAWDA members should ensure quality control keeps pace with increasing volume to maintain customer loyalty.


  • Plan for U.S. fabricated metals new orders to rise through at least 2018 as U.S. industrial production expands.
    • Look to expand distribution channels as volume demanded rises for the next two years.
    • Communicate competitive advantages to customers; build the brand during this period of growth.



  • Rising food production may contribute to increased need for new agricultural-equipment production as demand for food products rises in 2017.
    • Make opportunistic capital and business acquisitions to prepare for increasing demand before production accelerates later in the year.
    • Invest in system and process efficiencies to prepare for rising demand.


  • General rise in the U.S. leading indicators suggests greater levels of activity in 2017.
    • Look to maintain and pursue quality as production expands.


The major news over the last quarter is that the U.S. macroeconomy is on the upside of the business cycle. U.S. Real Gross Domestic Product through December, which grew at
an annualized rate of 1.9 percent, is in a tentative accelerating growth trend. Rising macroeconomic leading indicators, including the ITR Leading Indicator (fifth month of rise), suggest that the accelerating growth trend will persist into at least the second half of 2017.

A general rise in commodity prices is helping the U.S. industrial sector recover. The U.S. industrial production annual data trend rose in December for the first time since the August 2015 peak. Meanwhile, U.S. consumers are in a position of strength thanks to rising employment, an increase in the pace of wage growth, low inflation and low interest rates. Rising consumer expectations and high savings rates signal that the U.S. consumer is both willing and able to increase the rate of spending in 2017.

Prepare for a good year in the U.S. macroeconomy by ensuring you have adequate capital and labor available to avoid capacity constraints. Interest rates are low and are expected to rise along with wages; investing in capital equipment at today’s low interest rates is a worthwhile strategy to consider.

Also, be prepared to compete aggressively for labor, especially skilled labor, in a tight labor market as U.S. private-sector employment rises through at least 2018. Ensure your workplace offers competitive monetary benefits as well as non-monetary benefits, such as flexible work hours, that help retain workers. Finally, examine your 2017 pricing plan to take into account rising energy prices and labor costs.

Expansion in overall U.S. industrial production in the upcoming two years and a generally stronger consumer in 2017 will present growth opportunities for GAWDA members during that time. Think of how you can capitalize on the recent consumer and industrial trend transition to accelerating growth. Invest in customer market research: Know what they value and market your brand accordingly.


Moving totals/averages are used to smooth out the volatility inherent to monthly data at the product/company level. Monthly Moving Total (MMT) vs. Monthly Moving Average (MMA): There are times when it is desirable to calculate a monthly moving average instead of a total. Averages are used when the data cannot be compounded such as an index, percent, price level, or interest rates. Totals are used for things where it makes sense to add the data together (for example, units sold or total dollars spent).


A three-month moving total (3MMT) or average (3MMA) is the total (or average) of the monthly data for the most recent three months. Three-month moving totals (3MMT) or averages (3MMA) illustrate the seasonal changes inherent to the data series.


A 12-month moving total (12MMT) or average (12MMA) is the total (or average) of the monthly data for the past 12 months. The 12MMT(A) removes the seasonal variation in order to derive the underlying cyclical trend. It is also referred to as the annual total or average.


A rate-of-change figure is the ratio comparing a data series during a specified time period to the same period one year ago. Rates-of-change are expressed in terms of the annual percent change in an MMT or MMA.

Rates-of-change reveal whether activity levels are getting progressively better or worse compared to last year. Consecutive rate-of-change illustrates and measures cyclical change and trends.

ITR Economics’ three commonly used rates-of-change are the 1/12, 3/12, and 12/12, which represent the year over-year percent change of a single month, 3MMT(A), and 12MMT(A), respectively.

A rate-of-change above zero indicates a rise in the data relative to one year prior, while a rate-of-change below zero indicates decline.