Business

Cheap Oil & GDP Growth: Is this a catalyst for growth?

I could barely believe it as I pulled into the gas station. Did the sign really say $1.98 for regular unleaded? I quickly tried to access the time machine (my mind) to remember the last time we’ve seen gas prices under $2.00. It’s been awhile, and I couldn’t access the information through the muddle of data overload.

Fortunately, we have Google for times like these. It was July 2010 when we last saw gas prices this low, and that was only in some very small markets.

So, oil has found the basement, and this means a few more dollars in the hands of the consumer. But the bigger question is: What does this mean to the systems integration industry? Are we on the front end of the next boom, or are we reaching for correlation between items that share no common ground?

In late December, NSCA released its Winter 2014 Electronic Systems Outlook. We release these reports so members can make sure they have the latest and greatest information about what’s going on in the broader economy, and a way to quickly connect this information with what’s happening in our business.

For companies that have been awaiting the turning point, 2014 was a big year. Although universal growth and success are never in the cards, the data is pointing to the next economic rise, in which we all should find just a bit of relief. After all, it has been a tough few years.

With unemployment becoming more stable (reaching a rate of less than 6% for the first time since 2007) and GDP showing meaningful growth beyond just trade deficit, the broadest indicators are pointing up. When these indicators rise, we usually see a rise in consumer confidence…and we have. This rise in confidence almost always correlates to more spending personally and commercially.

In the integration industry, it’s important that we take the breakdown of spending a step farther by looking specifically at the construction industry. Although the professionals in our industry aren’t building skyscrapers, office buildings or homes, our industry’s growth correlates almost precisely with the growth of construction. The largest capex projects tend to take place when construction does.

To help integrators make a reasonable comparison, we look at an array of vertical markets, technologies and geographic markets across the United States. This way, a Kansas-based integration firm that does primarily acoustic work for schools can get a better feel for what’s going on in the market(s) most relevant to it.

It’s difficult to summarize more than 30 pages of hard research and raw data here, but the important takeaway is that signs are pointing toward improvement in almost every area. Here are some key data points that most universally relate to the systems integration industry:

  • Total electronic systems construction in 2014 was -$20.4 billion
  • Corporate construction grew by 9.9% in 2014, and is expected to grow by another 7.6% in 2015
  • Every technology (acoustic, voice/data, life safety, building automation and signage) grew in 2014 over previous years with a total growth rate of slightly more than 5%
  • Education, government, healthcare and house of worship market spending on electronic systems is all posed to grow in 2015, with growth rates ranging from 2% to 5%
  • Lodging has the biggest growth potential in 2015, showing 14% on the heels of more than 24% growth in 2014

Every business circumstance is unique, but one of the key strategic components of any business is to grasp the external environment. This is precisely why we capture a snapshot that integrators can use to understand what the markets are doing, as well as how these data points compare to their businesses. According to the Winter 2014 Electronic Systems Outlook, we are finally starting to see daylight between what once felt like an impenetrable forest of negative data and economic circumstances.

This shift gives us the opportunity to invest in evolving our businesses internally, and focusing on how we stay strategically ahead of the game: investments that tough times often force us to put on the backburner, no matter how much we need to commit resources to them.

As I stand by the gas pump and watch it register, I can’t help but breathe just a bit easier as I see the numbers add up to a fraction of what they did just a few months ago. Sure, a few extra bucks helps; it helps everyone. But, for me, it was more of a sign of the next wave, where we’ll get just a little more room to breathe in our businesses.

Now, if the credit markets follow suit, maybe we can turn what looks like the next period of prosperity into something really special for the systems integration industry.

For information about the Winter 2014 Electronic Systems Outlook, go to nsca.org.

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