Rarely have business leaders faced so many uncertainties about the future in domestic and global issues. Yet business leaders must make decisions and plan for the future in our turbulent geopolitical environment.
The 2016 CHESS conference, October 6-7, in Rosemont, IL, offers top-level presentations for housewares industry executives. On Thursday, October 6 economist Bernard Baumohl, will outline some of the many factors to consider in our complex, interconnected world. Chief global economist of The Economic Outlook Group based in Princeton, NJ, Baumohl looks at the big picture to see trends brewing in regions across the globe. With humor and clear-eyed interpretations, Mr. Baumohl will give an overview of the U.S. and international economy to inform business leaders about potential hotspots.
We spoke with Mr. Baumohl in the summer to learn about what might be in store for CHESS audiences in the fall. He outlined the basics, saying that he was fairly optimistic about the fundamentals of the U.S. economy; trends are rising despite some volatility. He mentioned that retail sales are positive, there has been a rebound in hiring and we have steady job growth. Consumer finances are improving with rising incomes. As the labor market tightens, wages are edging higher in real terms, with wage increases higher than the rate of inflation.
“In manufacturing, we must look carefully at individual sectors, and identify manufacturers that provide products for the U.S. consumer market and those that depend on exports, as there is a slowdown of demand in other countries. Also there is an increasing anxiety about the rising costs of manufacturing in China—as wages creep higher, China is no longer as competitive,” Baumohl stated. Some U.S manufacturers may consider moving operations to other countries or relocating to the U.S., especially if they can rely on robotics, which requires major capital investment and needs credible return. “This is an important transition,” he cautions, “since China is crucial for decision makers, also because of real concerns about the reliability of the entire global supply chain.”
He spoke about the disputes over sovereignty in the South China Sea and warned, “if China militarizes those islands, it raises the probability of military confrontation with the U.S. and other nations. Tensions are increasing. The possibility of interruptions in the supply chain in that part of the world gives manufacturers another reason to seek more secure, stable, and reliable locations for operations.”
His recent appearances at conferences of supply chain managers revealed to him that many in the field are unprepared for the greater global shocks we will see with higher frequency, so “It’s important to find the weak links in your chain, and diversify your supply chain to protect yourself and prevent the reputational risks of not satisfying your clients.”
As Baumohl pointed out, “The U.S. and the world economy are interdependent and deeply integrated. Not just the economy, but also the global financial network. Any disturbance, in fractions of a second, can shock markets and cause profound psychological effects.” He continues, “Stock markets plunged after the Brexit vote in the U.K, but fears soon subsided and the market rebounded to record highs. We’ll see what evolves over the next few years with the European Union. But we see a host of other serious geopolitical risks. If those erupt in next 36 months, for example in China and the Middle East, we will face greater consequences than in the past.”
“If I were a manufacturer selling housewares products to a consumer market, I wouldn’t look at mature economies, but would focus on regions of the world with the greatest growth in demand for what we sell. For example, look to South America, and parts of Africa and Asia, where there is an emerging middle class whose residents have the financial resources to improve their quality of life, and who can buy the products we sell. But the global economy is not growing well lately, especially in Latin America. Brazil has more positive natural attributes than any country on this planet, with enormous potential, but is coping with many economic and political problems.” Venezuela and Argentina also face economic crises, but may ultimately prove to be important markets. Similar situations exist in Asia. Russia might be a problematic economy for some time.
“One of three dollars in our economy is tied to international trade—about 30% of our GDP relates to a combination of exports and imports. The Federal Reserve projects a growth rate of about 2% for the U.S. economy, which is not substantial and doesn’t provide much of a buffer against the next major shock that we can’t know about. We’re doing better than treading water, but we want to grow faster,” he adds. “We need stronger growth overseas, need resolution of issues in the South China Sea, and need governmental attention in Europe and Japan, in particular, so that the private sectors in many countries can increase their spending.”
In addition to international concerns, business and political leaders worldwide are anxious about next year because of the U.S. elections. “I suspect IHA members, who depend so much on international trade, are watching exceptionally closely, as they are definitely going to be affected, no matter who becomes President,” Baumohl advised.
The U.S. presidential election is “a big cloud hanging over the U.S. economy into 2017,” he says. “Economic forecasters must consider scenarios based on assumptions of who will be in the White House, and apply an understanding of stated policies in order to form any conclusions,” Baumohl explained. When comparing a Hilary Clinton vs. Donald Trump presidency, business favors stability. At this stage, three months out from the election, “It’s extremely difficult to model or create a formula about the U.S. economy and insert Trump’s policies, since his statements have lacked specifics. Clinton is a known entity,” he said. “But surprises may yet emerge, so it’s too early for confident projections. By October at the CHESS conference, the outlook may be clearer,” he believes.
Bernard Baumohl, chief global economist for The Economic Outlook Group, has delivered keynote presentations before conferences, workshops and legislatures. He is a member of the monthly Wall Street Journal Economic Forecast Panel and his projections on the economy and geopolitical outlook are frequently cited in the New York Times, Washington Post, Business Week, Financial Times, and on National Public Radio. Currently he is an adjunct professor at Florida Gulf Coast University and is on the faculty of the New York Institute of Finance.
In his earlier career, Baumohl was an award-winning economics reporter with TIME magazine who covered the White House, the Federal Reserve and Wall Street. He also served as an analyst with the Council on Foreign Relations, a think tank specializing in international affairs and national security, and later was an economist at the European American Bank.
Be sure to attend IHA’s CHESS 2016 (Chief Housewares Executive SuperSession), October 6-7 at the Westin O’Hare in Rosemont, IL, to get a clearer view of what’s next. The program for Day 1 includes a panel discussion of housewares executives discussing management in times of change and political commentator Charlie Cook predicting where our country is headed, in addition to Bernard Baumohl’s overview of global conditions.
This strategic education and networking event brings attendees close to high-profile industry experts and allows decision-makers to share information and ideas with other housewares and home goods leaders. Held annually, CHESS attracts more than 150 chief officers of IHA’s most prominent member companies. The program includes keynotes, panel discussions, general sessions and networking opportunities—the most valuable part of the two-day event according to past participants.
To register for CHESS or for more information, visit the CHESS website or contact Isabel Barabicho at IHA.
