Economy Report-Week of Nov 9 2019

About the Free Market Corner

As a business owner, you need to understand how the global marketplace and government policy may impact your bottom line. The "Free Market Corner" will help you as a business (or aspiring) owner to understand the macro picture and will help prepare you from potential impacts (positive or negative). Topics will vary based on current market activity. Topic suggestions are more than welcome! My contact information will be provided at the bottom of each article. Now, let's talk about the market!

Need help deciding whether to expand or contract your business?

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Projected 2019 Holiday Sales

Last month, the National Retail Federation forecasted the 2019 holiday retail sales will grow between 3.8 and 4.2 percent over 2018 to a total of between $727.9 billion and $730.7 billion. The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with an average holiday sales increase of 3.7 percent over the previous five years. Thinking about making a new sales campaign? Try one or more of these holiday sales ideas!

The overall U.S. economy still remains strong with a 2% GDP growth rate despite the current China/US trade wars (which have impacted stock market volatility). Business owners that rely on imported Chinese products may have been impacted by the September 1, 2019 tariffs. The Trump administration appears to be in negotiations to stop the upcoming December 15. 2019 tariffs. Despite Chinese earlier reports saying they will roll back their own tariffs, Trump contradicted such claims on Friday, November 8.


source: tradingeconomics.com


source: tradingeconomics.com

According to a May 2019 paper published by the Federal Reserve Bank of New York, prior Chinese import tariffs cost the average U.S. household $831 a year  through higher prices and reduced economic efficiency. Despite the pessimistic outlook, consumer sentiment has yet dip below the record low of 89.8 (August 2019).

Consumer debt has reached an all time high of $4 trillion (non mortgage) but a record low unemployment (2.7%) and positive consumer sentiment has shown that the consumer is wiling to take on more debt.

Need help deciding whether to expand or contract your business?

Schedule a free consultation today!

What does all of this matter to you?

Despite the rosy outlook from the latest White House economic report, toting the GDP is higher than projected - businesses owners need to prepare themselves for a potential slowdown in market.

Low unemployment usually precedes a recession -the gray area in the FRED table below marks prior recessions.

 

In addition, the global market has already shown weakness. The IMF World Economic Outlook has reported a sluggish world economy since July 2018. Nobody can predict exactly when the market will downturn but some economists have suggested a 40% chance that the US economy may soften by mid 2020.

Recommendations

If you are thinking about expanding your business operations, proceed with caution. This is especially true for those who import/export goods to the world market. The US as well as other countries have been experiencing a slow down in manufacturing. The September 2019 US Census Manufacturer has reported $496.7 billion sales, down-.06% (year over year).

Even though consumer sentiment remains high and the recent Fed cuts have created a more favorable interest rate environment, it may not be a good time take out a loan. In a recent Fox Business interview, Atlanta Federal Reserve President Raphael Bostic said that the economy is currently in a "good place."  Bostic predicts GDP to slow to somewhere in the 1.5%-1.75% annual rate in the fourth quarter after a 1.9% rate in the third quarter. That would translate into a 2.1% growth rate for the year. Despite this "positive" news - the Federal Reserve is trying everything it can to pump up the economy, but healthy economies usually do not need interest rate cuts. Not everyone in the Fed agrees with the cut.  Even Bostic disagreed with the latest Fed cuts - see the video below..

 

Unless absolutely necessary, avoid taking out a commercial loan. Cheap money is not necessarily good money.

 

Got a question or comment? I would love to hear from you. Please email denise[at]victornovis.com

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