Morris Beschloss

The high-end commercial/industrial construction and the multi-faceted energy sectors are booming. Even the maintenance, upgrading and energy preservation of existing homes have become potential revenue growth opportunities for the intrepid tradesmen among the thousands of construction personnel idled by the residential depression.

The statistics of today's housing industry put the current stagnation in stark perspective. At the peak of home building in the early years of the past decade, residential construction per year numbered over one million starts. This had become the norm as a "house for every family" seemed to have been ingrained in the bulk of America's 310 million plus populace.

Today, these starts are bumping along at 300,000 per annum, at best, so far this year. However, the switch to rentals seems to have gained momentum.

Reports from all parts of the country are indicating a conversion to long-term leasing and renting not seen since the 1950's. This is true of high rise apartment buildings, which are experiencing conversion from condos to rental apartments; and individual homes which are being rented by the thousands, often by banks which have received their ownership by virtue of foreclosures. To underscore the plight of existing housing sales, 40% of recent transactions have been instigated by the bank takeovers.

As demand for rentals is expanding, and vacancies of apartment space is fast diminishing, the beginning of new construction of relevant rental structures should accelerate as a significant factor during the fourth quarter.

On the other hand, the pipe-valve-fitting arena is sizzling. While overall manufacturing and exports have cooled off during the past quarter, oil and gas production, transmission and refining have exceeded previous expectations. This is due to the following factors, which are expected to maintain well into the next year:

1) With West Texas intermediate crude prices pivoting on the huge inventory reposing at Cushing, Oklahoma hanging in at over $85 per barrel, while the world price of international Brent Crude maintains an upward gap of $20, the U.S. refineries, advantaged by higher selling prices, are using much of this financial windfall to repair, maintain and expand their facilities on site. This is now going full tilt, after a two-year lag due to the lack of refining margins.

2) The fracturing process for natural gas and oil has reached record volume levels, as current and anticipated higher prices make it increasingly profitable to utilize this technology, which has been available for the past 50 years.

3) "Buy America" has been a supporting factor in the utilization of domestically-produced and American brand name PVF products increasingly being called for. A combination of strong U.S. product marketing, and concern with non-American branded products due to a recent rash of systems failures have proved influential in the use of U.S. PVF production installations.

However, a continuing concern is the aggressive regulation of the Environmental Protection Agency, which maintains a hostile regulatory attitude toward oil and natural gas "fracking," as well as coal-fired utility power generators.

Going forward, the major concern facing the PHCP industry in general is a worldwide economic slowdown, especially in the U.S., which has seen even the White House lowering annual 2011 growth to less than 2%.

It's doubtful that President Obama's latest initiatives, presented to a joint session of Congress Thursday, September 8 will do much to strengthen the growth picture for the rest of this year, and well into 2012.

With unemployment representing the major burden weighing on U.S. economic viability, by the Administration's own admission, an average 9% unemployment rate will likely continue to extend well past the 2012 November 6 general election. The cancellation of Obamacare, Frank/Dodd strangulating financial regulations, and the Sarbanes/Oxley accounting nightmare would encourage the business community enough to expand its growth commitment.

But there's practically no chance that the Administration will go to these lengths to unfreeze the current "hiring restraints" in which thousands of independent and even publicly-held corporations are engaging.