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Josh Lower

Low Oil Prices, Global Slowdown Challenging US Industry Growth

by Josh Lower | Dun & Bradstreet Editor

February 26, 2016 | No Comments »

China’s slowdown could trigger a global crisis. The oil industry is in disarray. Eurozone recovery remains in doubt. Housing outlooks range from troubling to dire. Emerging economies aren’t the growth engine they once were. (Gulp!)

Despite these daunting challenges, the US economy will experience solid growth in 2016, with GDP increasing 2.6%. So says the Interindustry Forecasting Project at the University of Maryland (INFORUM), which provides growth forecasts included in First Research industry reports.

INFORUM updates its forecasts twice a year, and its latest outlook factors the strong headwinds that still challenge the US economy. Revenue growth in many sectors was weaker than expected in 2015, largely due to a widening trade gap resulting from a strong dollar and weakening foreign economies. The reduction in exports hurt US manufacturers, a sector already struggling to adjust to sharply lower oil prices.

The oil crisis will continue to challenge US industries in 2016. The EIA expects average crude oil prices to remain below $40 per barrel in 2016, conditions that will stifle exploration and production and related equipment investments and construction spending.

Fortunately, there are a number of positive forces that point toward growth. US employment has increased steadily since 2010, and wages continue to inch upwards. Low interest rates, import prices, and personal debt levels are boosting consumer confidence and should drive household consumption. INFORUM expects inflation-adjusted consumer spending to expand 2.8% in 2016. Government spending also appears to be stabilizing (real government expenditures are expected to increase slightly for a second consecutive year in 2016), and the highway bill passed last fall could mark the beginning of major infrastructure investment.

In terms of the impact these forces will have on specific industries, INFORUM’s latest outlook is consistent with its last. Despite the challenge that declining oil exploration puts on nonresidential construction spending, momentum in the residential market should still drive growth in a large number of construction and construction-related markets. The health care sector should also grow as more of the newly insured begin using their benefits. Among the industries with low or negative growth outlooks, tobacco manufacturing and certain segments of traditional retail stand out as businesses challenged by more than just the current market forces.

For more detailed information about the trends, challenges, opportunities, and growth prospects for more than 500 industries, visit First Research.

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Josh Lower is an industry editor for First Research/Hoover’s.

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