The Recession is Over, According to Steinway

Posted: September 26, 2013 in Piano

Most economists don’t know this. Keep reading.

The musical instrument manufacturing industry is a leading indicator.

That may not seem earth-shattering to you, but if you want to predict recessions and recoveries, you need to follow the performance of music manufacturers.

Here’s the way it works.

Musical instruments are a discretionary luxury good. Sales are pretty consistent year to year. Six months before a recession hits, sales plummet. It takes 2 quarters of bad earnings for economists to officially declare that we are “officially” in a recession. Musical instrument manufacturers have already made adjustments by that time. A loss of $100,000 in sales in one month will take 10 months to recover after the recession is over. You have to move fast when the market turns. Music managers can’t wait six months until some economist on the news declares that a recession has started.

Similarly, when the recession recovers, it takes longer for people to return to buying luxury goods. When sales return to normal in the musical instrument industry, it is a strong indication that the recession is over. We are the first to get hit and the last to recover. do money managers and stockbrokers pay attention to trends in the musical instrument industry. Hell no!

Now read this article from Music Trades:
 Strong Steinway Sales Suggest “The Recession Is Over”  

SETTING A SPIRITED TONE for Steinway’s annual dealer meeting, Steinway & Sons — Americas President Ron Losby declared to the assembled dealers, “The recession is over.” The evidence: factories in both the U.S and Europe working overtime, unit sales up double digits, dealer investment in new showrooms throughout North America, and the just completed sale of $3.5 million worth of pianos to the University of Tennessee at Knoxville.

Steinway & Sons’ senior management team will remain in place following the ownership change scheduled for September 19. Pictured with the 160th anniversary piano designed by Dakota Jackson (l-r) Olaf Gube, v.p. worldwide manufacturing strategies; Werner Husmann, managing director Asia-Pacific; Michael Sweeney, CEO, Steinway Musical Instruments; Ron Losby, president, Steinway & Sons — Americas.

This positive assessment of the company and its dealer network also came on the eve of a sale of Steinway Musical Instruments to billionaire financier John Paulson. Losby indicated that the change of ownership, scheduled for September 19, would bring an end to two years of uncertainty and signal to the entire organization that “it’s time to hit the accelerator.” Steinway Musical Instruments CEO Michael Sweeney said of soon-to-be new owner John Paulson, “For those who think this may bring a rush to change, [Paulson] has assured us that he has no plans to influence how or where Steinway pianos are built. We are committed to our factories in Astoria and Hamburg.”

At the meeting, dealers were introduced to a straightforward three-pronged, five-year growth strategy that focuses on a strategic approach to institutional sales, leveraging technology, and enhancing dealer exclusivity and profitability. Steinway’s management team presented compelling data and market support strategies to help dealers realize gains in all three areas.    Steinway’s close working relationship with its North American dealer network has generated incredibly strong results for the first six month of 2013. Unit shipments of Steinway grand pianos are up 24%, and sales of Boston and Essex brand pianos are up 25%. “Exclusivity and profitability will continue to drive the partnership we have with our dealers that sell the family of Steinway-designed pianos,” Losby said.

The recession is over, according to Steinway. It might be hype coming on the heels of the purchase sale of Steinwaym but it probably isn’t. Nobody blows smoke like Steinway, but Steinway dealers know that, so it unlikely that Steinway would blow smoke at a dealer meeting.

Bank on it. The recovery is strong, and it happened on Barack Obama’s watch.


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