Archive for the ‘Growth’ category

USA economy can only grow now

January 15, 2017

made-in-usaNow it is a good time to review how things have evolved. The US economy has been growing since 2008 and there is no sign that the speed would halt during 2017. The unemployment is on a historically low level at 4,9%. The baby boomers are retiring and more young adults are studying than in the past, so I don’t see this as a problem for the USA. There are more vacant jobs everywhere now. Some improvement is certainly needed for those who would like to work but are not looking for a job, and the labor force participation degree is thereby low. In my expectation I see a shortage of qualified employees to remain and even getting stronger what should actually lead to higher salaries and at the end to inflation, too.

The USA presidential election resulted in a situation that has brought the stock market up and made the dollar stronger. The former benefited investors, however, the latter one makes US exports more difficult unless the hit is eaten up by lower profits from overseas. For the rest of the US economy it means higher purchasing power that feels good and pushed against the inflation. This is a very interesting situation, and when the intention of the President elect is to force or at least target more factory jobs to remain and return to the USA, the employment market just improves over he coming years.  The shortage of skilled workers and even white collar employees is evident. This will on the other hand help young adults to enter the working labor force, what gives hope to many.

Now we land to my favorite topic: Manufacturing in he USA. The trend of returning manufacturing jobs from overseas is getting stronger, and it will get intensified by the actions the President elect will do. This leads to a re-birth of manufacturing in the USA and communities that start to thrive again. It is almost written into stars that the government will find a way to force foreign entities of US corporations to return their earnings from overseas, and this will happen through tax laws. When jobs are returning for the middle class and some income gets repatriated from overseas, the US economy will get a booster I have predicted for many years now – new infrastructure, new jobs and higher tax income, and a wealthier and healthier society.

What I still miss, is the weakening dollar. Unfortunately, I might have to wait longer then a stronger economy usually improves the value of dollar. The independence of foreign oil and gas gives US a huge economic play field and strength that most of the nations of this world don’t have. The steadily increasing military build up globally will boost US economy on that front, too. Then there is the growing healthcare sector, life sciences, high tech incl. robotics and nanotechnology, online world, herbal/botanical sector, and aerospace industry etc. Even in a case the gl0bal free trade would see some limitations, the US economy will grow. The population growth is also an advantage for the USA as well.

What could go wrong? There are risks that are obvious: stock market and housing market crash in China, a deeper trade war between EU and the USA and or between USA and China, non-ratification of EU-USA free trade agreement, Canada and Mexico tightening economies with the EU against the USA etc. There there are risks of terror attacks and even wars in Europe with Russia and China in Asia. What happens with North-Korea and will it lead to a military confrontation. Will Russia start using nuclear weapons in middle range missiles and deploy them in Europe? Will EU build up the military to match with Russia or even on the long run with the USA? And last but not least: the nature catastrophes might have more influence than the man – rising sea level, tsunamis, earth quakes, meteorite hit, vulcan eruptions, hurricanes, tornadoes, massive snow falls or rains etc. One doesn’t have to be a prophet to make a statement that something of these will hit for sure. Then it is only a question of the strength. Whatever it is, the USA is in a quite good position to overcome the obstacle, but certainly more preparation is needed on state, city and district level. Let’s grow in 2017!

 

There is a new puzzle to play now

March 21, 2015

WP_20140404_001The world we live in has now a new situation to handle that I call a new puzzle to play. It is very much a complicated one, and I don’t like complicated issues, because they normally don’t work well. The very old game is back – power game. But not enough with that – now it is back even stronger through military power. So, we have now a game with economic power + military power + mental power + moral power + nature power. There are a couple of new elements or reborn elements here: the world has become multipolar with several centers of power – depending on definition – like Asia – Europe – USA or China – EU – USA or Developing countries – BRICS – OPEC – Developed Nations or nuclear and non-nuclear power countries and military pacts or lately more troublesome radicalization of groups of people – destructive power in a way.

There are simply more unstable and risky locations on this planet than a couple of years back through natural disasters, epidemic diseases, terrorism, military action and wars, corruption, unemployment, national debt, political instability etc.

The basic elements for a better future are centered around equality between people, freedom, and prosperity. We are talking here about happiness that can be seen in the “American dream” or even the highlights of the French revolution in 1789. The basic idea behind the EU is to avoid war between Germany and France – this has worked well. It is obvious for even a child without no education that you cannot succeed if you are in a fight all the time. So, the peace must be there as a foundation. If people do not have equal rights and a chance to improve their situation, lots of energy remains unused or is getting lost. Apparently until kinder garden age a human should understand to live in peace and have friends to play with. It is then obvious that by working together more can be achieved. Suddenly we figure out that Adam Smith was right – it makes sense to deal with others and improve ones situation (he wrote it also around 1789). Then you graduate from the high school with the great idea to change the world and make it better! After that moment people tend to forget everything and things get complicated!

This is nothing new yet, but I just wanted to remind you about the simple game we need to play and not the complicated one. There are now players who want to change the rules of the game by limiting the people’s rights, destroying peace and not letting them to pursuit after happiness and prosperity. The EU‘s foundation is in avoiding a war between Germany and France and that works well. With over 500 million inhabitants the EU is having the largest economic power now. However, the EU got surprised by Russia in respect to military power in Crimea and a war in Ukraine – the EU has no defense forces by itself. Now it is obvious that in future years a massive build up of a new military power will happen. That will be one driver of the European economy in the future. Furthermore I will expect that in a very near future European politicians will start to talk about birth rates and limiting immigration. When the birthrate will get up then the immigration will get reduced step by step. How to turn Europe to grow again is the main question. When the EU – USA free trade negotiations lead to a positive outcome there wlll be a new huge economic zone in labor. The USA has extra strength from the fracking oil and gas and thereby it has gained the independence of foreign energy. The economic zone with EU and USA and Canada & Mexico will be around 900 million people. That can be called a power! Also Canada and Mexico have free trade agreements with the USA and EU and both have oil, too. When the EU builds up its military muscle as well, the new puzzle has more parts to be played. China has reached economic power and it is now working on its military build up, too. The Chinese economy has been growing due to massive pumping of public money into infrastructure. Now the economy is running if the consumption remains high and grows. There are too many empty buildings in China and stock values might be too high, so some reduction in property values and stock might be expected in the future. The low cost oil has helped China a lot in its situation this year. Europeans profit of the ow cost oil as well. Australia has been doing well for a couple of decades now based on mining industry and Asian growth. The situation should stay like that, unless nature events disrupt the positive trend there. That risk is also with other countries, too, like Japan, Vietnam, Philippines, New Zealand, the USA, Chile, Turkey, Italy just to mention a few. India has a huge potential for the future. This will certainly drive European and US politicians and businesses to improve ties with India. The democracy in India is a positive thing, but the values are at least partially still far of the western ones – especially what comes to the quality of people. The regulation is also something that needs of improvement there. When India invests in India (unlike Russia not investing in Russia) and continue to do so the results will be remarkable – even today the national income per capita in India is higher than in Russia – what a change! My expectation is however that India will have more closer ties with Middle East countries in the future based on the energy issues related to oil and gas. India’s distance to ME is less than to Europe or the USA. The new component in the economic part of the puzzle is the rising countries in Africa. There is now oil and gas and a low cost level available. Some companies are moving out of China to Africa already. Many educated people from Europe are moving to work in Africa now and help them to build their new wealth. There is lots of hope in Botswana, Namibia, South-Africa, Mozambique, Tansania, Kenia and others on top of Nigeria and Ghana and North-African countries who had oil already. I shortly only mention now that there are developments also in the South American countries and an intensifying situation around the polar energy discussion related to Canada, USA, Greenland (think about Denmark as an oil country, too), Norway, and Russia.

This was my short introduction to the new puzzle with multipolar situation. In the future I will dive deeper into this and give more projections and forecasts about the future. It is interesting to see that many things have been moving toward that direction I have predicted. Especially my hope of closer economic ties between EU and the USA seem to proceed well. My biggest mistake so far is that the USA has not made the decision yet to print so much of Greenback (dollars) that it could pay off the foreign debt. That day might however come later on – the timing is very difficult to predict. My assumption didn’t take the fracking oil into equation and that changed the situation. However, the outcome is anyhow what I predicted – the US economy is growing again.

Shifting powers impact future paths

April 5, 2014

Jurmala Turtle

There are some strong changes ongoing in the global arena that will influence the  business environment of tomorrow. I will discuss here some of those shortly. One  less spectacular change is that the European Union has been able to get the joint  area rectified from a long lasting downward path. The EU as a whole is  economically stable now although there are still huge differences between areas.  This means that Europeans are earning more than they are spending – the area is  not adding any debt but is able to save. This builds a strong basis for more positive  anticipations for the growth because 70% of EU’s economic activity happens  inside the EU. There are two questions for Europe: energy and defense forces.

Another change is that the USA is now independent of foreign energy sources. This has given a boost for the business in form of lower energy costs than in other parts of the world. On top of that the nation is also growing in number of inhabitants unlike Europe or Russia. The economic activity is growing and new jobs are created. The USA is less dependent on exports than other nations, so the growing economy will be a kind of self sustaining motor that will also attract foreign companies to invest in the USA. The lesser energy is imported to the US the better the foreign trade balance that might turn to positive in the years to come due to anticipated exports of gas. Maybe a bit surprising insight I have is that the USA must get Mexico and other nearby countries in the south stabilized so far that the neighbor country Mexico would get a strong growing middle class. This would have a huge impact for the growth and stability in the USA as well.

The third change is the weakening economic influence of China. The Asian giant is still growing at at a rate of 7 % p.a. However, China’s growth is not anymore coming from exports at large but more through growing consumption and imports. That will be the trend for coming years. Many local infrastructure projects have been financed by local “shadow banks” that have lent money to local governments bypassing regulations not to borrow from banks. On top of this the environmental conditions are very bad – the air, water and food quality is questionable at many places. There are many important projects to improve the situation that is a business opportunity for some western companies, but the time is flying and people must make individual decisions what they will do. There are also two other factors that concern me: there a plenty of empty buildings where no one is moving in, and the stock market values. The energy supply is also causing some headache for the future – in a way a similar question like the Europeans have.

The fourth change is coming from the political and military arena: Russia wants to play a stronger and harder than in the past. The economy of Russia, however, is not supporting this for longer periods unless the price of oil and gas would rise and/or some nature catastrophe would cut the USA off from the political and military arena. Russia needs an update of everything – now they are updating only their military. That will certainly put them stronger to the arena, but what can be gained at the end by that? At least this will force Europeans to build up stronger defense forces. Russia is the largest nation measured in inhabitants in Europe, but economically with a GDP of 2014,8 bn USD at the level of Italy. Per capital that looks then much worse for them. Russia is certainly a player also in Asia with their natural resources and military power. The Russian government wants to force foreign companies to invest into manufacturing in Russia by demanding local content of production value to be over 50%. This is valid for strategic fields like energy, military, motor vehicles etc. This might bring some positive activity into the country, but the government should make it sure that the companies can develop and grow on a long/term basis. When that can be guaranteed there would be some hope for a better future.  The currency value has dropped 30% since 2012 and will anyhow make it difficult for foreign companies to sell in Russia. For a long-term development of the country it would most likely be better to improve the living standard of its citizens and the infrastructure including roads, railroads, health care, etc.

There are more of this kind of interesting developments, but as a conclusion of these short comments I can say that the USA will keep on growing now and become economically healthier day by day, but must take care of its south neighbor Mexico; the EU is stabilizing economically and must start to build up its own military power – will that happen without a deeper political union under Nato or not will remain to be seen – my guess is that the EU will do it on its own anyhow; Russia will put more power behind its military and will push for south although they should develop their country and make sure that the middle class could grow and prosper; Chinese must invest in China and will have less growth than in the past, and they will use their foreign exchange reserves to buy more companies abroad to  ensure the access to the markets in the west and to the technology. The risk of trade barriers is now higher than in the past. However, the negotiations between the USA and EU might lead to a better situation in the future.

There is hope for economies to grow, but risks of man made troubles – looks very much like the human history…

European perspectives and meaning for the USA

July 2, 2012

The USA exports goods and services for 1,48 billion Euro to Europe (2% of GDP and 20% of US exports), and imports for 0,96 billion Euro from Europe. Mr. Joseph Quinland of US Trust made an interesting comment in Finnish business paper Kauppalehti on June 15th by stating that Europeans are in charge of around 30% of total world private consumption – that is more than Americans and much more than Chinese. About half of foreign income of US corporations is generated in Europe. He continues stating that transatlantic economy represents 41% of world’s GDP! So, there is an important role to be played by Europeans for the world economy and US especially.

The problems in Europe vary a bit by country, but the basic question is how to generate growth. The growth brings jobs, investments, and capital into a country. Especially Spain, Portugal, Italy, and Greece need more and faster growth. The growth comes however through private enterprises and some public projects for infrastructure building. We have to ask, if there is demand for products and services in those countries and made by those countries. The best business prospectives are for companies located in Northern Italy, because they make high tech and high quality products for global markets. For Greece it looks much more complicated – the base for value added manufacturing and production is much thinner than in Italy. European politicans want to keep Europe more or less united and Euro zone as one, but EU has already today several currencies like Swedish Krona, Danish Krona, Czech Koruna, Sterling Pound, Polish Zloty etc. So, from that perspective it wouldn’t be a big deal to have a couple of more currencies in the EU. The nations in trouble would benefit from a lower valued currency to boost their exports and thereby generating  growth and jobs. My personal projection leans towards this kind of thinking – more national currencies, but stronger political and economical unification of EU. At the end there will be a federal state of Europe. Local currencies would allow differences in speed of economies, progress, productivity etc.

For the US economy it makes sense to keep and develop business with Europe on a high level to boost manufacturing in the USA and repatriating earnings from Europe. This balances also nicely the development in and dependence from Asia. Europe will see more national currencies and a deeper political and economic unification.

The growth in the USA

April 3, 2011

There are many positive news from the USA and elsewhere: the Merger and Acquisition activity has increased 26% during the Q1 in 2011 against 2010, in Europe M&A growth reached 27%, the Business Roundtable (US executives) and NFIB survey on small businesses expect investing and hiring activity to pick-up as well, and the global fundraising has increased by 12% according to Financial Times. However M&A activity in emerging markets shows to have declined by 14% – the focus is shifting towards Europe!

Very interesting is the development in the labor market. According to the US Department of Labor (on April 1st 2011) the non-farm payroll employment increased by 216.000 in March and the unemployment rate was 8,8% (drop of 1 % point). There were more jobs in professional and business services, health care, leisure and hospitality, and mining. It was also a good news that the manufacturing jobs have started to show growing figures (according to ADP around 37.000). The claims for unemployment have fallen below the 400.000 mark that is regarded historically as a sign for a recovery. The most(around 50%) of the new jobs were created in companies employing less that 50 people.

Despite the oil price hike, earth quake and tsunami in Japan, and unrest in Arabic region the world economy is on the growth path and the US economy is finally helping with. It looks really promising now!


				

The economy is steadily growing

March 19, 2011

The CEO confidence index in the USA shows an upward trend. Revenues and profits are expected to grow strongly over the next 12 months. Capital spending and hiring new employees are expected to grow, too, but with a slower pace. We have seen also strength in some European countries like Germany, Poland, and the Nordic region. China and India as well as Russia are growing. It sounds not too bad. There are certainly many elements which influence the development and can cause counter effects as well like higher oil price makes logistics and manufacturing more expensive, but helps oil producing countries to grow, and fuels western economies to develop alternative energy sources more eagerly. I’m very confident that 2011 and especially 2012 are going to be good business years. I will make a prediction that employment figures and the number of new jobs generated will increase more and more rapidly towards 2012. In Germany there is already a shortage on labor.

When looking at business cycles I remember the graph developed by George Tritch in 1910. He has been right most of the time – only WWII was an exception. A projection of his graph predicts an economic peak around 2019. If he is right at this time, we might see a longer period of steady growth in global economy. There are certainly going to be some hick-ups and short downs down the road, but I’m confident on this, too.

What causes question marks are political uncertainties in various countries like North Africa, situations caused by nature (Iceland, Japan), or countries not controlling their spending and falling into a debt which they cannot handle by themselves. Then there are currency issues which I have discussed earlier. Despite of these I’m now a firm believer of a positive economic development worldwide.