Deferred Spending Isn’t A Recovery

A recent article over on on Made in America. Staying in America. reported that a turnaround in the U.S. economy is contributing to the solid fourth quarter profits reported by manufacturers that have been staying afloat by making a killing by selling industrial goods to customers in emerging markets.

As the CEO of Eaton said, people that deferred maintenance eventually have to buy new products. And people who prolonged a product’s life with maintenance eventually have to buy new products. And after two or three years of deferred spending, no matter what efforts are made to keep old machinery working, it’s going to start to break and the organizations are going to have to replace it. This doesn’t mean that there’s a recovery in the works or that demand is going to skyrocket, and acting like this is the case will only lead to the appearance of the bullwhip effect in your forecasting. And that’s not good for anyone.

The economy will recover, but it’s going to be a slow-and-steady recovery this time. Not only is the North America is tired of the boom-and-bust cycle of the past decade, but the jobless recovery and continuing mortgage crisis is going to ensure that it will be a while before exuberance returns to the market. So take it slow. Your supply chain will thank you.