Global Economics and SMBs – Other Macroeconomic Indicators (Part 3 of 3 Part Serieas)

3rd of 3 part series

In the first two parts of the series, we discussed Europe’s well documented woes and what many economists predict will happen with the North American growth in 2012.  Now, let’s look at other variables that could further help to shape public sentiments as well as policy making decisions in the New Year.

  • The market itself – We had unprecedented volatility in 2012 as many investors went to brink and back.  It seemed only high frequency traders made money.  And you may ask, all that drama only to have DJIA up less than 6%?  The equities market is important since it helps to formulate strategy for many corporations when it comes to keeping additional “dry powder” for rainy days or investing in the infrastructure and the future.  And that has trickle-down effects on the job market and beyond.  The good news – many predict that it can only go up in 2012.                               Image
  • Inflation and CPI – Slowing inflation means your dollar goes further.  It’s as simple as that.  While many business leaders are reluctant to give too much credence to positive, much needed trend of lower raw material costs and modest, more manageable rise in CPI vis-à-vis rise in private –sector wages, even the most outspoken inflation hawks in the economics circle claim that inflation will be in check in 2012.

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  • Fed’s actions to further spur and continue the growth – dubbed QE3, two tried and true ideas are on the table.  Keep the short term rate low throughout 2012 and even into 2013 and re-start government bond purchase program to further increase liquidity in the market.
  • Growth in emerging markets – depending on how you define emerging market, overall growth will slow to below 5%, sharp decline from7%+ growth in 2010.  Nonetheless, it will still outpace the forecasted growth in the North America.

While these indicators point to incremental upside for SMBs in 2012 as far as positive business conditions are concerned, it is anything but a sure bet.  Again especially in today’s intertwined global economy, only time will tell….

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About Richard Lee
Experienced finance and operations professional. Currently partner in five companies, adjunct professor of economics at Columbia College and executive contributor to a small business blog (www.SMBmatters.com); following corporate finance, M&A and management consulting tenures with Orbitz and Diamond Technology Partners; and six years of service with the United States Army.

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