Special Report: Forward Momentum in 2012
The mass may be smaller and the velocity may be slower than desired, but the rock is rolling in the right direction.
Momentum is sometimes hard to define. In sports, it may be a crucial play that changes the outcome of the game. In business, however, it might be something as simple as a sale that leads to an unexpected customer base. Often, it may seem like a small pebble, but once it starts rolling downhill — gaining mass and velocity along the way — its impact can be significant.
Movement alone, however, is not enough. Just look at the results of our forecast studies during the last eight years, and it’s clear that not all momentum is good momentum. For example, consider the industry’s historical response to business conditions. When answering our first forecast in 2004, 84.5 percent of respondents indicated positive business results (excellent, very good, or good). For a three-year window between 2008 and 2010, however, those numbers plummeted with an all-time low in 2009 when just one in three respondents (34 percent) reported favorable business ratings. Those numbers increased slightly in 2010, but 2011 respondents gave the most favorable business ratings (43.4 percent positive) since 2007.
Another favorable indication is the accuracy demonstrated in yearly predictions and the subsequent results. With the exception of those predicting a fair year, responses from last year’s forecast results versus this year’s actual results are all within 5 percent, and most forecast discrepancies erred toward being overly pessimistic.
Excellent: 1.6 percent forecast; 5.7 percent actual (+4.1 percent difference);
Very Good: 12 percent forecast; 13.2 percent actual (+1.2 percent difference);
Good: 24.8 percent forecast; 24.5 percent actual (-0.3 percent difference);
Fair: 44.0 percent forecast; 34.9 percent actual (-9.1 percent difference); and
Poor: 17.6 percent forecast; 21.7 percent actual (+4.1 percent difference).
From a regional perspective, producers in the Northeast were the most likely to report positive results with nearly six in 10 (58.3 percent) indicating positive business results in 2011, while approximately two-thirds (67.5 percent) of those in the South reported fair or poor results.
Small producers (under 500,000 tons per year) were the most likely to indicate positive business results, with the level of optimism diminishing in a direct correlation to increasing tonnage until hitting the large end of the spectrum with producers of more than 5 million tons per year. This group was slightly more inclined to report favorably, with one in three reporting favorable results, compared to three in four reporting fair or poor business results in the next largest production category (3 million to 5 million tons per year).
In terms of operators experiencing changes in production quantities throughout 2011, an equal number said they’d increased and decreased production. It’s worth noting that, of those reporting an increase, the average increase was 25 percent higher production. Among those indicating a decrease, the average decrease was 19 percent. The largest gains were had among producers of crushed stone and sand and gravel (30.8 percent reported an increase) and among those in the North Central region (43.5 percent indicated higher production levels).
So what’s next?
While gains appear evident within pockets of the industry, several years of inertia are challenging to reverse. Looking forward in 2012, small improvements are being predicted in most categories. Comparing forecast projections from 2012 to 2011, 6.6 percent expect an excellent year (+5 percent), 12.3 percent expect a very good year (+0.3 percent), and 26.4 percent expect a good year (+1.6 percent). In terms of negative expectations, 35.8 percent expect a fair year (-8.2 percent), while 18.9 percent expect a poor year (+1.3 percent) in 2012.
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