Sunday, June 3, 2012

Connecting the Dots - Why Economic News Matters to FM's

It is never a safe or necessarily wise thing to try to predict the future, and I am not.  Make no mistake about that.  But all of us should maintain an awareness of the world around us as we plan our personal and business lives.  I am generally an optimist and pragmatic, believing that trends are cyclical; when it's bad it is bound to get better, and when it is good a healthy dose of realism when planning is prudent.  That said, I also recognize that some highs are higher, and some lows are lower.
As I listen to the voices around me and filter them through my own biases and experience, some resonate.  A couple of information "dots" that I am now connecting give pause. 

Bill McBride over at the Calculated Risk blog is one of the best I see at giving us hard data coupled with objective information.  If you track his history over the last few years you will quickly understand why he is respected as one of the best in the area of simplifying economic information (why I appreciate him so much) for greater understanding.  He gives us this reality check as it relates to employment numbers.  We all know it has been a rough road.  Looking at this graph makes it clear that this has been a very deep and wide trench.  It is good that we have begun to claw our way up, but last week's employment numbers amplify that we have a long way to go.

Robert Zoellick, departing president of the World Bank offers a sobering summary of world wide economic fragility in this recent Wall Street Journal interview.  The list is long...Europe's issues, lackluster U.S. job growth, general lack of political will to make necessary choices, the impending "cliff" facing the U.S. economy, escalating difficulties in developing nations as they struggle with trickle down effects and their own issues all combine to form a daunting image of the months and year(s) ahead. 

The Conference Board offers supporting albeit more positive analysis, including the following statement on the outlook for advanced economies.  

"Advanced economy growth is expected to slow down from an already meager 1.6 percent in 2011 to 1.3 percent in 2012. For 2013-2016, the outlook suggests some recovery in advanced economies, bringing these countries back to the pre-recession growth trend of a little more than 2 percent."

I am not suggesting doom and gloom here and I note again that I am not a trained or even amateur economist.  However, I do pay attention to the data points as those who are expert talk.  From all accounts this will continue to be a period of increased risk and fragility.  This month and the rest of the summer will be important as Europe makes decisions that will affect all of us for decades.  Those dots have connected and will continue to do so.  They bear watching, closely.

As FM leaders we share a responsibility to guide our organizations through the future.  Keeping our eyes and ears attuned to the outside world as it changes and adapts economically is an important function in forming strategy and capital development plans.  

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