Government’s ability to pull us out of a recession through increased spending was, to some degree, a major issue in recent state and federal races. Economists battle over the data. Citizens often don’t understand or care about the data, but they duke it out at the polls nonetheless.
Whichever position you take, I couldn’t help but notice an article in the Triad Business Journal on-line edition that was published, coincidentally, on Election Day (“Martin Marietta Shares Rise as Rock Sales Grow”). According to the article, Martin Marietta, one of North Carolina’s major suppliers of aggregate (stone that is used in construction), posted strong third quarter earnings because of a “6.3 percent increase in the volume of rocks, gravel and other construction aggregates sold by the company . . . .”
About 25 years ago, one of my good friends from college went to Wall Street where he worked as an analyst for the auto industry. He once explained to me that you don’t judge the industry’s health by looking at cars coming off the line. You look, instead, at the companies that supply the parts the auto companies need. Sage insight from a guy who majored in Latin and Greek.
The same principle holds for real estate growth and local land development. If Martin Marietta or Vulcan Materials or Wake Stone or other companies in the aggregate business increase their sales, it means that somebody in the growth industry is buying. Shopping center developers? Residential subdivision developers? Industrial parks?
I could only wish. The entire article was framed by this one sentence: “Increased state transportation spending drove much of the increase.”
The Business Journal then added: “Looking forward to 2011, Martin Marietta said it could not issue guidance [on income projections] until the fate of President Obama’s proposed $50 billion infrastructure-investment proposal is determined – an outcome that will be impacted by today’s midterm elections.” (Read “government spending.”)
And we know what happened by end of day on November 2nd.
So . . . the question I have asked many times in this blog still remains. When do our planning boards get active again? When do planning staffs get to work on more than text amendments and road closings? When does growth return?
The answer still appears to be “not soon.” When you have the time and the patience to peer at distant horizons, economic growth does occur when public (read “government provided”) infrastructure – from roads to airports to utilities – is upgraded. But if you’re fixated on the prognosis for the next quarter’s growth, you must look at different markers. The retail industry won’t snap back until jobs and consumer spending increase on a sustained basis. New home construction won’t fully return until the inventory of new homes and lots that piled up through 2008 is absorbed and the credit markets relax.
And what happens when government spending is drastically cut? I think the answer is around the corner.
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