Global Economic

How will today’s global economic performance impact your company / client

china currencyOver the last few days global economic data / information has appeared in the Wall Street Journal.

While common threads exist it is the individual divergence that may impact your situation.

What is the impact on your business or a client’s enterprise?

Enterprises with investment grade ratings are turning to the Eurozone to issue long term debt instruments to take advantage of the trillion being made available.  10 year bonds with yields of 3.9% and 30 year bonds with yields of 4.7%.  Yields are running 1.7% above treasury yields.

What will these bonds be selling for in a few years?

The universal we live with oceans on two sides and friendly neighbors north and south. Well mostly friendly.

This insulates us from the ongoing turmoil that concerns all of us. That said the world is smaller than we all think and what transpires around the globe directly and indirectly impacts all of us.

If China has a cold how will it impact our growth and ultimately us individually? Russia’s economic woes evolving from its aggression, not seen in decades, and the aggression itself create questions and opportunities.

Germany, the leader of the EU, reflected surprising strong economic data in the face of healthy headwinds. Greece is a non-issue for us but if it impacts major players in the world.

How will it impact us?

China

  • Rate cut of .25% to improve the economy only four months after the last rate cut.
  • Growth is expected to slow to 7% – remember the highs – and think about what it was like in the United States in the late 1800 through the mid 1920s – oh what a time many had.
  • An overbuild property market that is slumping – declining prices
  • Capital is leaving china
  • Falling prices create turmoil
  • Borrowing costs for business are rising
  • Government expected to continue rate cuts, and spend on infrastructure
  • Chinese manufacturers are seeing weak demand and overall overcapacity.

Japan

  • Factory output grew sharply in January
  • Consumer consumption stayed weak, nine months after a rise in the national sales tax – did the sales tax hinder sales that much?
  • Industrial production rose 4.0% in January lifted by solid exports of electronic components and automobiles
  • Household spending fell 5.1% from a year earlier in inflation-adjusted real terms.
  • Retail sales data were down 2.0% from a year earlier
  • The unemployment rate ticked up to 3.6%
    there are 114 jobs for 100 job seekers.
  • Consumer inflation slowed to 0.2% in January

Russia

  • Military and law-enforcement expenses consumed 40% of the annual budget. (remember Russia’s economy is not bigger than Italy’s – our wine is better)
  • Inflation is currently running at 16%
  • The economy is expected to contracted 3% in 2015
  • Capital continues to flow out and will exceed $110 Billion – equal to the revenue of Costco.
  • Cash reserves are dwindling rapidly down to $8 Billion from $86 Billion

Eurozone

  • Retail sales rose again in January
  • New $1.12 Trillion stimulus program – buy those bonds with a target inflation rate of 2%
  • Consumer prices fell for the 3rd straight month in February
  • Manufacturing and service sectors indicate increasing manufacturing activity above a reading of 50
  • Employment increased at fastest rate in more than 3 years.

USA

disappearing inflationThe U.S. in January saw its first dip in overall consumer prices in more than five years. But the economy is far from the precipice of debilitating Japanese-style deflation. Economists do not see the dip in overall prices as a reflection of a poor US economy as in Eurozone and Japan. The decline is pinpointed to the decrease in energy costs as food costs are up 3.2% and shelter costs increased 2.9%.

By | 2017-03-06T12:04:50+00:00 March 4th, 2015|business advisory|0 Comments

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