When I was asked by Kitchen Bath & Business to share my thoughts on the global economy and its influences on the US architecture and design industry, I realized that this query might be better directed to an economist. Since economists are not known for providing insights in an exciting (or understandable) manner, I figured that I would take a stab at it with the help of some of my industry friends.

My first stop was with my Broker at UBS PaineWebber. Steve seems to think that the increases in the price of oil cause increases in the costs of finished products and services (and something about Gross Domestic Product, but I wasnít writing fast enough) which impact budgets. OK, that makes sense in both the short term and possibly long-term. So, what can you do with this information? Provide contingencies for increased materials and services costs in your budget to deal with these issues now and start looking for alternate, more efficient (less expensive) sources for the future.

Realizing that Steve is on to something, I next called my buddy Richard Fiore, Sr. of BFI Construction to see what someone on the frontline might have to say about the practical results of something global like oil prices. While Richard agrees that there is an increase in materials cost (steel, in particular, has increased dramatically in the last few months), his experience is that businesses understand that costs go up and they are still moving forward with projects, even if that means adding to the budget, 25% in some instances. When a client is ready to go, they are going to go for it, regardless of inflation or other factors. However, he did acknowledge that in order to offset some of the financial burdens placed on restricted budgets (clients don’t willingly spend more, but want you to suffer the burden as well), hiring caps are necessary in some instances and more work must be accomplished with fewer workers.

So far, I was finding the advice very upbeat, realizing that the market ‘goes with the flow’ and business moves forward. My next call was to Paul Bosworth, President of LeeJofa, the venerable fabric house, to get a perspective of someone selling directly to the trade. He immediately addressed the reality of trade and competition from markets with skilled labor at extremely low prices. Naturally, China is consistently sited as one of the largest manufacturers of quality products at extremely low prices. What does this mean to the trade? It can be good news for design professionals and their clients with lower prices on products. Naturally, for US based manufacturers, it can feel like a threat since competition can erode their market share. In order to maintain a competitive edge, Paul thinks that continual innovation of product and services will allow US (and other Western businesses) businesses to stay ahead of China for the short term. Of course, this investment in research and development can be a boon to clients in terms of innovative products and services that they might not otherwise obtain.

For myself, being a New Yorker, the first thing that comes to mind is 9/11 and its impact on security and immigration. There are added expenses for projects in order to make sure that people are safe in case of terrorist’s attacks. Safety glass, security monitors, extra space for set-backs from streets, are just of few of the things that are being utilized to protect the public. It is also harder for people to get into the country and work here, so once plentiful sources of skilled, blue-collar labor is not as available. This causes labor shortages, particularly with the construction industry, and longer project timelines and/or higher costs for qualified workers. Make sure that your General Contractor has not overcommitted for resources and can delivery on-time and on-budget.

And naturally, there is the issue of politics. At the time of this article, the Presidential election is a week away and who knows what will happen? I believe that either way the results go, we are blessed with an economy that is improving and with the prospects for a very favorable 2005. I’m bullish about prospects and think that if you are planning on raising your rates, now is the time to do it! Think globally, act locally!

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