Industry Forum: The Hurricane Effect
"Investors were clearly jolted by the impact of Hurricanes Katrina and Rita, the spiraling rebuilding costs and the implications for oil supply and distribution," says Maury Harris, UBS chief U.S. economist. "Having also lived with high energy prices this summer, investors now view rising costs as part of a longer-term trend, rather than a short-lived phenomenon."
According to the USB/Gallup survey, the great majority of investors say the current energy prices are hurting the U.S. investment climate. Fifty-four percent say the investment climate is hurt "a great deal," while 34 percent say it is hurt a "moderate amount." As compared with last year, investors now believe that the current rise in gas prices represents a more permanent trend. Seventy-one percent of investors believe the rising prices are part of a permanent trend, compared with 56 percent in May of 2004.
At the time of the survey, the average price of gas experienced by investors was $2.99 a gallon. Investors expect that three months from now, the average price will be $3.09. On this matter, the views of investors varied considerably, according to the poll. Forty-seven percent expect that prices will rise in the next three months, by an average of $0.55 a gallon. Forty percent of investors expect prices to decline by an average of $0.39 cents a gallon. Another 12 percent of investors expect no change. The survey finds this uncertainty may be due to the unpredictability of gas prices and conflicting predictions in the media.
Fifty-one percent of investors say they have suffered financial hardship this year because of the price increases, compared with 42 percent in August of 2004. Seventy-eight percent of investors say they have curtailed spending in at least one of four areas as a direct consequence of higher energy prices: 66 percent have curtailed their driving, 57 percent cut back on general spending, 49 percent cut back on vacation, and 31 percent reduced their use of fans and air conditioners.
According to USB, this month's survey also showed a significant drop in the percentage of investors who think now is a good time to invest in the financial markets, from 59 percent who felt that way last month to 51 percent now. According to the survey, the last time investors were this pessimistic was in March 2003. Other issues weighing on investors' minds are concerns about economic growth and inflation.
These findings are part of the 90th Index of Investor Optimism, which was conducted September 1 to September 18. To track and measure Index changes on an ongoing basis, new samplings are taken monthly. Dennis J. Jacobe, research director for Gallup, said the sampling included 802 investors randomly selected from across the country. For this study, the American investor is defined as any person who is head of a household or a spouse in any household with total savings and investments of $10,000 or more. Nearly 40 percent of American households have at least this amount in savings and investments. The sampling error in the results is plus or minus four percentage points.
What does all this mean for our industry? Despite the survey findings, attendees and exhibitors alike seemed optimistic about the future of finishing at what appeared to be a successful Coating Show last month. Of course, Hurricane Rita was still ravaging her way through the Gulf of Mexico and had not made landfall just yet.
Drop me a line at spielmans@paintandpowder .com and let me know your thoughts on how Mother Nature has impacted your finishing business.
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