The economy will have to grow at a negative rate over the next two quarters in order for the US to be in a recession. But is there cause for concern that a recession may occur? Yes there is, but the government’s interventions should keep the US from falling victim to recession. I believe that the economy will eventually pick itself back up and avoid a recession. The GDP will once again grow at a quick pace.
According to the Commerce Department, the total value of goods and services slowed to 2.3% with a previous rate of 1.8% last year. The gradual decrease in growth indicates that the economy may be reducing to a more sustainable pace, and avoid another intererst rate increase from the Fed. The increase in employment costs may yet sway the Fed to to raise interest rates, but July will be decisive. Consumer consumption has fallen from 6% in increase in 1998 to 4% in 1999. The fall in consumer consumption has had its toll on the GDP as it too has slowed.
It is a significant improvement, but it will still take time to return to where it was in the past. According to World Economic Outlook, it is expected that there will be slight growth in global GDP by 2010 at around 4%. A slow expansion in advanced economies is expected during 2010, reaching an annual growth rate of about 1.25%, compared to the 3.5% contraction in 2009.on the other hand, in emerging economies, it is expected that the growth of gross domestic product will reach an annual rate of about 5% in 2010 compared to 1.75% in the previous year. A rise in global demand for oil in 2010 is anticipated due to the continuing global economic recovery. The emerging markets constitute the main sources of growth in consumption, while the developed countries are still facing deep problems.
This points towards increased spending due to increasing disposable income which in turn will create an increase in consumer sentiment. Thus it seems that the consumer activity indicators point towards economic growth.
What are the main reasons as to why this recovery has been so lackluster? The first reason is that the 2007-2009 recession was caused by the housing bubble and the collapse of the housing industry, which normally kick-starts recovery. After the 2007-2009 recession, since the housing prices are unlikely to return to previous levels, the economy is taking longer to recover. The second reason is that globalization has caused domestic employment to rise slower than if all the increase in employment goes to domestic hiring. (Joel, 2013) Compared to the past, we have more imports than exports (Olney, 2013); as the economy recovers, a greater part of the increase in GDP goes to foreign economies instead of our own.
However, there has been talk that America may be close to another recession. A recession occurs when there are two consecutive quarters when the economy shrinks. The size of the economy is measured by gross domestic product, which is the value of all goods and services produced within the United States. (http://en.wikipedia.org/wiki/Early_2000s_recession)1 The quarterly Anderson Forecast by the University of California at Los Angeles predicts growth in the gross domestic product of just over 1 percent for the fourth quarter of 2007 and first quarter of 2008. Economic growth will remain "tepid" for the remainder of 2008 and return to 3 percent in 2009, said David Shulman, senior economist for the forecast.
The current revision to Q1 EPS is -4.5%, slightly ahead of historical behaviour. This is not necessarily disastrous, as the experience of the past 14 quarters indicate: EPS estimates were trimmed by an average -3.1%, but the S&P500 enjoyed an ave... ... middle of paper ... ...verage hourly earnings has hit 4%. This suggests that 2015 will bring greater risks of wage inflation eroding corporate profitability. A recovery in 2014 H2 S&P500 operating EPS is expected, but dividend growth is expected to slow this year and in 2015. Equity investors currently appear to be demanding less of a dividend safety buffer than in the earlier stages of the post-March 2009 bull market.
There have been indications that rates may start to rise in the next 12 months and in the latest minutes of the Bank of England's meeting it seemed that a ... ... middle of paper ... ...rest rates reach 1.75% annuity rates could be 12.5% higher. The value of sterling would increase if interest rates rose. International investors would be more likely to use British banks for their savings if the interest rates in the UK are higher than in other countries. A strong pound also makes British exports less competitive which could have the effect of reducing exports and increasing imports thus reducing the overall demand in the economy. Interest rate rises also have the general effect of reducing confidence both for the consumer and business which has the effect of discouraging risk taking and investment.
The economic reduction in the first quarter negative growth has led to the big recession debate, but the real challenge is that the South African economy is facing a stagflation trap. * The inflation rate firmly hugged the 6% upper limit of the Reserve Bank’s target band over the past three years, while economic growth decreased to a below-par 1.9% last year in 2013 — and might not even reach that level this
The biggest decline was seen is accounts payable which decreased by $170,500 to $230,000, a decline of 42.6 %. Activity: The inventory turnover is almost half compared to the industry average, although it managed to increase by 0.3 compared to 2002. The company needs to maintain a constant cost of goods sold and at the same time manage inventory more efficiently to maintain market competitiveness. The average collection period also increased slightly to 58 days, three days increase compared to 2002. The company needs to negotiate or persuade on efficient payment methods to customers to decrease the collection period down to industry average.