Ben Treece: CE-Oh NoWritten by Ben Treece | | email@example.com
Going into election season, it is not uncommon for sources to be misquoted and misinformation to run rampant. Anyone who feels they can sway public sentiment can and will. Whether it is polling numbers, economic figures or selective quotations by public figures, everyone attempts to apply their own spin.
We have always prided ourselves on looking at information and numbers skeptically and for our ability to go out and seek answers. The sad fact of the matter right now is that the economy is not doing as well as some of the numbers may be leading you to believe.
The Business Roundtable (BRT) is “an association of chief executive officers of leading U.S. companies with more than $7.3 trillion in annual revenues and nearly 16 million employees.” The Washington Times recently reported on the BRT’s projections following a slow third quarter — and the outlook for the fourth quarter is not looking great either. In fact, projections are the lowest that they have been since 2009.
Since being pulled last quarter, the number of CEOs that…
- Expect sales to increase in the coming quarter decreased by almost 23 percent.
- Expect sales to decrease has tripled.
- Plan to increase spending has decreased by 30 percent.
- Plan to cut spending has increased by 58 percent.
- Expect to hire more workers has decreased 20 percent.
- Expect to lay off workers is up 70 percent.
There are several factors that have contributed to a dismal outlook for private sector businesses.
To start, many companies are experiencing a noticeable slowdown in their international business. Europe’s economic woes have resulted in a substantial decrease in discretionary spending, and China stocks recently hit their lowest levels since 2009. Both of these factors translate into less demand for U.S. businesses, which means lower revenues, lower profits and a lower demand for labor.
Another major factor affecting business outlooks has been the increasing cost of regulation. The SBA recently reported that regulations will cost small businesses an estimated average of $10,000 per employee per year. Polls show that 78 percent of small business owners believe these regulations hinder their ability to grow and hire new employees.
Lastly, the lack of any clarity out of Washington, D.C., has been stifling economic growth. We have mentioned time and again that we have our own political beliefs, but we do not allow those beliefs to influence our economic judgment. The “fiscal cliff” that the U.S. is facing has been brought on not by one party or another, but by Congress being unable to achieve necessary compromise. Neither side is willing to budge, and businesses are terrified that inaction will result in increased costs and lower profits.
If no agreement is reached, spending cuts and tax increases will kick in at the start of the New Year, which can stall growth during an economic recovery. If a deal can be reached, corporations will begin to get a clearer picture of what their tax burden will look like and how much operating revenue they will have moving forward.
We have written before that corporations are sitting on historically high levels of cash, roughly $2 trillion to be more exact. This additional money does provide a safety net for businesses, but just because they have cash readily available does not mean that they are going to spend it without knowing what is to come. As much as we hate to admit it, politics do affect private sector business, and we are getting a glimpse of what happens when the private sector is kept from doing what it does best — driving our domestic economy.
Ben Treece is a 2009 graduate of the University of Miami (Fla.), with a bachelor’s degree in international finance and marketing. He is a partner with Treece Investment Advisory Corp. (www.TreeceInvestments.com) and a stockbroker licensed with FINRA, working for Treece Financial Services Corp. The above information is the express opinion of Ben Treece and should not be construed as investment advice or used without outside verification.
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