Factors that will drive success in the new year

By |  December 7, 2022


This year was the closest thing to “normal” as we’ve seen in almost 30 months.

Our company saw a record level of demand for products in 2022, with the pace driven primarily by aggregate producers. We expect product demand to be consistent through 2023 and into the first quarter of 2024, but the overall level of demand is subject to the influence of headwinds here at home and abroad.

Key influencers

One potential contributor on the demand side is the launch of the Infrastructure Investment & Jobs Act (IIJA). While it is safe to assume the funds will have a positive impact on the industry, a question becomes how much of a positive impact IIJA will ultimately have.

In terms of equipment demand, producers tend to focus on higher-ROI items and products that promise longer periods between service, as well as reduced dependency on labor. Reducing dependence on manual labor will be critical to producer success in 2023 and, perhaps, their short-term survival.

Our customers are having issues finding, attracting and maintaining associates to run plants – and with a 3.2 percent unemployment rate, it is easy to see why. So it is paramount to maximize production levels and exploit any area where efficiency can be improved.

Other key factors

Navigating the new normal

Paul Ross says the aggregate industry is comprised of strong, nimble companies that adapt to rapidly changing conditions. Photo: P&Q Staff

Separately, we expect inflation, interest rates and material costs to level off in the first quarter of 2023. This should be a big relief for everyone.

Labor costs will continue to increase in response to a continued imbalance between the number of people searching for meaningful work and the number of positions available. This factor will be material to everyone’s overall position in the industry, and it will impact pricing for practically all goods moving forward.

While those who serve the aggregate industry can afford to be cautiously optimistic, it is important to address the looming recession – or current one, depending on your view – and the effect it may have on the industry.

The U.S. experienced two quarters of slightly negative GDP, but the economy grew at a 2.6 percent rate in the third quarter – indicating a slight improvement. This is good news.

This dynamic, however, is coupled with slowdowns in business and consumer spending as adjustments are made in response to inflation and rising interest rates. The spike in interest rates will likely result in fewer capital projects for most of 2023, and the trend will likely carry well into 2024.

On a positive note: The recession is likely to be mild overall, and it will not resemble the recessions of recent memory. In my opinion, we are actually experiencing a “W”-shaped recession – and we may actually be at the middle peak of that “W.” What this means is we will see another dip and then, with any luck, bounce back up and move forward at a slow but steady pace.

A number of factors will influence the severity and length of this cycle – not the least of which is the volatility we see around the world. So while it pays to be an optimist, it is important to be aware that unanticipated events occurring far from home do, in fact, have a real impact on the state of our industry.

Additionally, we will continue to see U.S. companies decouple from certain nations and adjust supply chains to more reliable partners. Expect to see closer alliances between North American and European suppliers as companies continue to evolve their business models, seeking out partnerships with companies in nations that are more dependable.

The bottom line

The industry is adapting to a variety of external influences that may prove difficult to navigate in the near term – with some of them likely to persist. Still, our industry is comprised of strong and nimble companies that adapt to rapidly changing conditions, pressing forward constantly.

Paul Ross is president of Douglas Manufacturing, an Alabama-based manufacturer of conveyor components and engineered systems.

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