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cdhmanning
The problem with watching how people react about the economy is that people act ...
sudo
One of the worrying signs is the huge US debt. Sure, some economists may argue ...
Reading the economic tea leaves
Jim McGregor
6/26/2012 4:47 PM EDT
Judging trends and growth
One of the main issues is judging trends and growth. When is slow or slowing growth bad? Generally speaking, the financial markets indicate any negative growth trend as an ominous sign. However, all entities, including products, companies, and economies, experience varying rates of growth throughout a lifecycle and slowing growth as they eventually reach a large size relative to the potential market.
In the US, politicians preach higher growth rates to reduce unemployment and increase prosperity, Yet, with a total GDP equal to just over 19 percent of the global GDP, a slower growth rate between 1.5 percent and 2.5 percent may be better for sustained growth than a growth grate between three to four percent.
In addition, slowing growth in an explosive economy like China may avoid the huge bubbles and crashes that have historically plagued other emerging economies. Regrettably, finding a sustainable growth rate is elusive, and finding equilibrium between sustainable and politically or financially acceptable growth is impossible.
At the current time, the slowing growth rates of the BRICs, US, and Japan are concerning but not to the point that they are threatening the global economy. In fact, the slowing growth rates may be beneficial in the long-term. Although many theorize the EU crisis could pull the entire world financial system and economy into another tailspin.
Even with an adequate response to the EU situation, which continues to elude the region’s politicians, the impact of the situation is likely to be felt throughout the rest of this decade with slower growth rates for the region as a whole. However, I would argue that continued growth in the US and emerging economies may offset this threat. Economic growth from emerging regions was vital to overcoming the recession on a global basis and will continue to be essential in stabilizing the global economy in the future.
Another key factor to consider is the current timing. Industries and markets typically take a breather during the northern hemisphere summer. So, judging the outlook for the global economy is even more difficult until consumer and businesses determine their outlook and spending patterns closer to the fall. Unfortunately, these are likely to be influenced by the current press and data, which would indicate that the outlook for spending could be rather pessimistic later this year; once again, pointing to a trend of slower growth through the end of the year.
To see the impact of the economy on the electronics industry, one does not have to look beyond some of the industry leaders. Recent comments or conservative forecasts by the likes of Dell, Cisco, HP and Samsung have rocked the outlooks of financial markets, yet demand for electronics devices and services is still growing and several segments of the market are facing component shortages.
The continued growth, even slow growth, is still good for the electronics industry and results a more stable environment for future investment. So, now is not the time to retrench or panic. If anything, it is a time to prepare for more sustainable growth rates over the next few years.
Jim McGregor
TIRIAS Research
Founder/Principal Analyst
One of the main issues is judging trends and growth. When is slow or slowing growth bad? Generally speaking, the financial markets indicate any negative growth trend as an ominous sign. However, all entities, including products, companies, and economies, experience varying rates of growth throughout a lifecycle and slowing growth as they eventually reach a large size relative to the potential market.
In the US, politicians preach higher growth rates to reduce unemployment and increase prosperity, Yet, with a total GDP equal to just over 19 percent of the global GDP, a slower growth rate between 1.5 percent and 2.5 percent may be better for sustained growth than a growth grate between three to four percent.
In addition, slowing growth in an explosive economy like China may avoid the huge bubbles and crashes that have historically plagued other emerging economies. Regrettably, finding a sustainable growth rate is elusive, and finding equilibrium between sustainable and politically or financially acceptable growth is impossible.
At the current time, the slowing growth rates of the BRICs, US, and Japan are concerning but not to the point that they are threatening the global economy. In fact, the slowing growth rates may be beneficial in the long-term. Although many theorize the EU crisis could pull the entire world financial system and economy into another tailspin.
Even with an adequate response to the EU situation, which continues to elude the region’s politicians, the impact of the situation is likely to be felt throughout the rest of this decade with slower growth rates for the region as a whole. However, I would argue that continued growth in the US and emerging economies may offset this threat. Economic growth from emerging regions was vital to overcoming the recession on a global basis and will continue to be essential in stabilizing the global economy in the future.
Another key factor to consider is the current timing. Industries and markets typically take a breather during the northern hemisphere summer. So, judging the outlook for the global economy is even more difficult until consumer and businesses determine their outlook and spending patterns closer to the fall. Unfortunately, these are likely to be influenced by the current press and data, which would indicate that the outlook for spending could be rather pessimistic later this year; once again, pointing to a trend of slower growth through the end of the year.
To see the impact of the economy on the electronics industry, one does not have to look beyond some of the industry leaders. Recent comments or conservative forecasts by the likes of Dell, Cisco, HP and Samsung have rocked the outlooks of financial markets, yet demand for electronics devices and services is still growing and several segments of the market are facing component shortages.
The continued growth, even slow growth, is still good for the electronics industry and results a more stable environment for future investment. So, now is not the time to retrench or panic. If anything, it is a time to prepare for more sustainable growth rates over the next few years.
Jim McGregor
TIRIAS Research
Founder/Principal Analyst
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sudo
7/1/2012 8:34 PM EDT
One of the worrying signs is the huge US debt. Sure, some economists may argue that it doesn't really matter as long as the country can service the debt. Still, I know that it would not happy times for me if I maxed out on my credit cards, even if I'd be able to make the minimum repayments.
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cdhmanning
7/10/2012 11:13 PM EDT
The problem with watching how people react about the economy is that people act on perceived change - not what is really happening. I am sure many of those Americans who have resumed high consumption cannot afford it but have decided that if they're going bankrupt then they might as well rack up a bit more debt while they can.
Generally, US consumers are fueled by debt. If you lend to them, they will spend be that on housing or consumer goods. Underneath is the US economy really improving or is the debt hole just being dug deeper so that the charade can continue for a few more months?
For other countries that supply to the US economy, this is some extra profit that can made. Wiser countries are, however, seeing this as a short-term windfall.
The US economy is indeed huge. As a huge vessel sinks other close vessels get caught in the whirlpools. Most countries outside the US see what is happening and know that the US debt madness cannot continue forever. Many countries that were wed to US performance are now diversifying and hedging their bets. They want new markets established before the US can no longer raise more cash.
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