Batten down the hatches!

Global business confidence is waning.  Q113 GDP in the U.S. was revised downward below 2% and projections for Q213 have fallen as low as 0.3% (Morgan Stanley economist).  The following graph reflects the net expected change in global business activity over the next 12 months i.e. future business expectations.  Lending by U.S. commercial banks is declining sharply.  This contraction in loan demand is not good for business.

Business expectations, global

The global trends in business activity, while still net positive, are clearly in a state of decline.  Note in particular the year over year declines from 2011 to 2012 and now 2013.  I’m suggested to my business owner and manager clients that they should be budgeting for weaker, not stronger growth in the years ahead.  This recommendation specifically relates to new business investment and capital spending.  The stock market which is hitting new highs weekly has detached itself from economic reality.  For those considering the sale of a business, I would make haste and strike while the iron is hot.

U.S. firms dealing in international markets will be especially challenged as a competitive devaluation is occurring in the foreign exchange markets.  To protect or mitigate their home-land export economies, one country after the next is devaluing their currency in an effort to make their export prices all that more attractive in the global marketplace.  The most recent case is point is Japan where the Yen has been devalued from 78 Yen to the U.S. dollar last October to over 100 today.  That’s well over a 25% devaluation in effect making U.S. goods imported into the Japanese market, over 25% more expensive absent any foreign exchange trading adjustments.

During the global depression of the 1930’s, competitive currency devaluation led to isolation where countries no longer traded with one another.  This led to another and more protracted leg down in that depression.  Do you think history will repeat itself?

If you find my market insights beneficial and would like assistance with your accounting and investment activities, please contact me, Christine Meder at Christine Meder’s Accounting Advisory Services.  My email is mederchristine1526@gmail.com and you can tweet me at @christinemeder1.  I’m offering a free 30 minute consultation during the month of July.  #unrbrand

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About Christine Meder
Leveraging my insights and professional experience of 25 years in the accounting profession, I and my firm Christine Meder's Accounting Advisory Services provide our high net worth clients expert advice on their business activities and investments. In addition to performing traditional accounting functions in a confidential manner, I pride myself in giving clients a competitive edge whether it be in running their businesses or managing their investment portfolio. My studies leading up to completion of the EMBA program at the University of Nevada, Reno this August provide me with latest skills and techniques utilized across a broad spectrum of business functions. This breadth of education is complemented with experience as an accountant in the construction, mining, real estate and technology fields during my career. If you are looking for a trusted adviser or consultant in addition to someone you can rely on to properly keep your books, please contact me.

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