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Starting the Year

Jan. 7, 2014
While there are areas of concern, our economic outlook for the US and the world is positive overall.

It is very cold and gray over much of the country today, and that could have a dampening impact on the economic start to 2014. A cold snap can take some of the life out of housing and automobile sales as people stay in and/or they need more cash to pay for extra heating bills. It is easy to put off a trip to the dealership when you are concerned about freezing pipes. The weather is bound to improve and with it will come ongoing positive economic opportunities in the US.

The housing industry should continue to expand through at least the next several quarters, though I am concerned that the very strong November numbers may not be real. It will be interesting to see if a data revision tempers all that good news. Conversely, the Christmas sales figures through December 22 were discouraging. It will be equally interesting to see the final results for December. That should tell us more about what to expect from consumers through the near term.

My major concern at the moment is the stock market. No, I will not try to time the market for you, but the length and strength of rise do make me nervous. Investors and business leaders could be significantly rattled if a steeper-than-median downturn develops, and it is hard to believe the market rise will continue unabated through 2014. I just don’t see that happening.

My other concern is Europe. A sluggish economy is one thing, but a return to recession is quite another. The latest figures are not encouraging; we seem to be at a point in time where the EU could easily slip into another mild downturn. A recession in Europe could unsettle investors and businesses globally given the sheer size of the EU-28.

We will watch Europe carefully in the coming weeks. Right now the European Central Bank is concerned about deflation so they are willing to pump billions of euros into the economy. But we know from the US that you can’t make people borrow and invest, two ingredients necessary to for a healthier economy. We also know from the US that businesses can increase profits without doing a lot of hiring, and in Europe that could easily translate into ongoing sluggishness in retail sales. We will keep you posted first and more in depth through our ITR Trends Report™.

For now the overall view is positive for the US and most of the world. Plan on growing your business in the year to come. Happy New Years.

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