Sunday, August 18, 2013

Several Business Leaders are Concerned about the Economy

As companies continue to report their quarterly financial results and discuss their business opportunities, the following observations from the retail sector, are worth considering:
  • Wal-Mart International ‘s CEO C. Douglas McMillon said “We’ve seen customers both in mature and emerging markets curb their spending “and “we believe that environment is going to remain through the end of the year”
  • Wal-Mart’s chief financial officer Charles M. Holley Jr., said there is “a general reluctance of customers to spend on discretionary items right now”,
  • Macy’s chief financial officer Karen Hoguet said, “We believe that much of our weakness is due to the health of the consumer” and
  • Nordstrom’s CEO Blake Nordstrom said, “overall, our sales trends in the second quarter and throughout the first half of the year weren't as strong as we expected.“
Also, John Chambers, CEO of networking equipment provider Cisco Systems (a firm considered to be an economic bell weather), said” we delivered the strong performance in what continues to be a challenging and inconsistent global macroeconomic environment…with economic challenges impacting several of our top five emerging markets” and “this recovery is more mixed and inconsistent than others I've seen.”

MY TAKE
While significant attention on “better than expected” data has supported the economic recovery, it seems that too much of the focus may be on the quantity rather than the quality of results.
  • For example, while unemployment rates are declining, this has often been driven by low-paying jobs in retail, temporary employment and health care.
  • In housing, as prices have risen, the participation of first time home buyers remains muted, with many sales pursued by a mix of speculators and institutional investors.
  • With stocks, as prices have risen is some markets, the primary drivers have been stimulus efforts by central bankers and cost cutting by business managers.
It remains to be seem if the much discussed “wealth effect” can translate into fundamental economic growth.

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