How we see 100 major markets

By Douglas A. Smock -- Purchasing, 1/11/2001

What a difference a year makes.

A year ago buyers faced rapid escalation in materials' prices. Energy prices drove costs higher in industrial markets through early summer. Then the economy started to slow and oil prices stalled, and eventually fell slightly. Heading into 2001—a new millennium and a new administration—uncertainty abounds. Energy remains a wild card. This time natural gas prices are at extremely high levels—so high that some manufacturers in the Pacific Northwest make more money selling energy futures than selling aluminum.

The biggest question facing markets as we begin the new year, however, is the economy.

The smart money says the economy will continue to grow, albeit at a much slower rate than the unprecedented boom of the 1990s. Our forecast, developed by staff economist Anne Millen Porter, is for 3% growth in gross domestic product, a little below the consensus forecast of a respected blue-ribbon panel. The economy may dip into negative growth for a quarter, but it's unlikely we'll see consecutive quarters of negative growth. It looks like interest rates will drop, the value of the dollar will drop, and the cost of oil will drop. All should help keep some buoyancy in the domestic economy.

Given the uncertainty, we've undertaken a brave project—specific price forecasts for 100 major products. But it's not really so brave because all of you have to make these calls with your company's money every day. We pulled together reams of our leadtime and pricing histories, compared them to our economic forecasts, and then called scores of industry experts: analysts, buyers and marketing officials.

The outlook? Less turmoil than last year. Most markets, however, will see efforts by producers to hike prices to improve sagging profit margins. DuPont, for example, had a $1 billion higher price tag for energy costs in 2000 than it did in 1999. At the same time, pricing levels for many chemicals and plastics went south. Even though supplies are ample for many products, attempts to boost prices in basic metals, chemicals and plastics will be intense. Old rules dictated a fight for market share. New rules dictate improved levels of profitability—at least for the sane.

At any rate, this project was a major undertaking, and it required us to marshal all of our resources—statistical and intellectual. Go ahead and hold on to this section—and let us know if we are wrong!

The complete 100 Major Markets Story is available as a PDF. Click here to download the file. Requires Adobe Acrobat.