February 2014
Annual subscriptions to our are $250.Newsletter
Put Our Experience To Work For You
803 Sheridan Road, Glenco...
[Return to index]
February 2014
Put Our Experience To Work For You
803 Sheridan Road, Glencoe IL 60022 ■ (847) 242-1000 ■ ...
[Return to index]
February 2014
Put Our Experience To Work For You
803 Sheridan Road, Glencoe IL 60022 ■ (847) 242-1000 ■ ...
[Return to index]
February 2014
Put Our Experience To Work For You
803 Sheridan Road, Glencoe IL 60022 ■ (847) 242-1000 ■ ...
[Return to index]
February 2014
Put Our Experience To Work For You
803 Sheridan Road, Glencoe IL 60022 ■ (847) 242-1000 ■ ...
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Will the Momentum coming out of 2013 Carry Our Growth Through 2014?

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The Newsletter discusses why the current political bickering may keep us out of recession for the next 3 quarters. The Wise Old Owl talks about how to use the current calm to be ready for the coming changes.

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Transcript of "Will the Momentum coming out of 2013 Carry Our Growth Through 2014?"

  1. 1. February 2014 Annual subscriptions to our are $250.Newsletter Put Our Experience To Work For You 803 Sheridan Road, Glencoe IL 60022 ■ (847) 242-1000 ■ Web: www.LRLevin.com ■ LLevin@LRLevin.com © Copyright 2013, . All Rights Reserved.L. R. Levin Consulting, L.L.C. Having muddled through fixing the debt ceiling until after the 2014 mid- term election, the government appears to have avoided doing much damage to the economy for the time being. It appears we are poised for a lot of political rhetoric for the next 11 months and very little constructive action. But what is the econo- my poised for? If the current economic forces are left to proceed uninhibited, it would appear that the positives are about balanced with the negatives. That leaves the economy with a stagnating, slowing slight growth con- tinuing through the first three quarters of 2014. The extensive tax increases that went into effect in 2013 and will go into effect in 2014, for example, are taking substantial liquidity out of the economy, hurting re- tail sales. At the same time the Press control and click to on topic to go to Feature 1. Will the Momentum coming out of 2013 Carry Our Growth Through 2014? 2. Recent Cartoon 3. The Wise Old Owl
  2. 2. [Return to index] February 2014 Put Our Experience To Work For You 803 Sheridan Road, Glencoe IL 60022 ■ (847) 242-1000 ■ Web: www.LRLevin.com ■ LLevin@LRLevin.com © Copyright 2013, . All Rights Reserved.L. R. Levin Consulting, L.L.C. 2 price of gasoline has been coming down, putting liquidity into the economy, help- ing to moderate the tax effect. By postponing the initiation of a substantial portion of the Affordable Care Act, the government has deferred a substantial number of the actions that will reduce liquidity in the economy. On the current time table for implementing the Affordable Care Act, consumers generally will not begin to ex- perience the dramatic increases in cost until we approach 2015. Businesses are now recognizing the inflationary wage pressures that are growing in the economy, as well as the potential increase in costs coming down the road from the Affordable Care Act, increasing regulation and taxes. This has had a positive effect of increased business to business spending in an effort to improve efficiency and position operations for improved revenue streams. One question is does the current economic data reflect the economy’s continuing slow stall? The US Leading Indicator’s 1/12 rate-of-change for January declined for the second consecutive month. This was driven primarily by declining building permits and hours worked in manufac- turing. Our strategic partner, the Insti- tute for Trend Research (“ITR”), ex- plained that the US Leading Indicator’s rate of change decline gave “additional confirmation of deceleration in the US economy lat- er this year.” ITR’s proprietary Leading Indicator was equally negative for January. It fell steeply in Janu- ary to its lowest level since November 2011. The ongoing decline in ITR’s proprietary Indicator sug-
  3. 3. [Return to index] February 2014 Put Our Experience To Work For You 803 Sheridan Road, Glencoe IL 60022 ■ (847) 242-1000 ■ Web: www.LRLevin.com ■ LLevin@LRLevin.com © Copyright 2013, . All Rights Reserved.L. R. Levin Consulting, L.L.C. 3 gests that growth in U. S. industrial production “will begin to noticeably slow in the second half of 2014.” Both the U.S. Leading Indicator and ITR pro- prietary Leading Indicator are consistent with the Theearlier Purchasing Managers Index for January. January Purchasing Managers Index raw data and 1/12 rate-of-change declined to the lowest level in seven months. By the raw data remaining above 50, the Index indicates that the economy is continuing its weakening growth. ITR believes that the decline in January Purchasing Managers Index 1/12 rate-of- change means the overall economy, will begin a “definitive decline in the latter half of 2014.” Other economic data also suggests that the economy is fragile, but still ex- panding at a very slow rate. One of the key supports for the economy, new home construction, dropped 16% in January, the biggest drop since February 2011. The data supported why the National Association of Home Builders’ gauge of home- builder sentiment fell to 46 this month from 56 in January 2014. This is the lowest reading since May of 2013. The total unemployment rate including short term, partially employed, and marginally attached workers remained at 13.1% in January, with long term unem- ployed making up more than 35% of that. It is scary that the government would think that there is no problem with “liberating” 2.5 million more people from jobs under the Affordable Care Act, 500,000 more through an increase in minimum wage, and deny what has been forecast by many economists as 300,000 total direct and indirect jobs that would be available if the government approved the Keystone Pipe Line. Added to the 20.1 million current unemployed that would catapult the number of unemployed to over 23,000,000!
  4. 4. [Return to index] February 2014 Put Our Experience To Work For You 803 Sheridan Road, Glencoe IL 60022 ■ (847) 242-1000 ■ Web: www.LRLevin.com ■ LLevin@LRLevin.com © Copyright 2013, . All Rights Reserved.L. R. Levin Consulting, L.L.C. 4 Another important support for our tepid growth has been exports. World economic growth is also slowing. China’s manufacturing index continued the trend at the end of 2013, coming in lower for the second month in a row indicating contraction in its manufacturing sector. China has also been experiencing wage inflation at a time when productivity is down as is domestic demand for goods and services. India is also facing economic headwinds. Like China, Europe is experi- encing a slowing of their economy, with Germany the one real exception. Mexico, Latin and South America are also experiencing slowing economies. The U.S. government’s new budget includes trying to materially reduce sup- port for our military, including cutting support for food purchasing at base ex- changes, housing allowances, and increasing the cost passed on to the military for medical care. All of these will take liquidity out of the economy at just the wrong time. Businesses need to prepare for the changing business cycle that is coming. The good news is that the government malaise currently effecting Washington ap- pears to be facilitating mild expansion through at least the first 3 quarters of 2014. Most businesses should experience a soft landing as we approach the end of 2014. Recent Cartoon
  5. 5. [Return to index] February 2014 Put Our Experience To Work For You 803 Sheridan Road, Glencoe IL 60022 ■ (847) 242-1000 ■ Web: www.LRLevin.com ■ LLevin@LRLevin.com © Copyright 2013, . All Rights Reserved.L. R. Levin Consulting, L.L.C. 5 This is a good time to determine if additional training for your employees will help you take sales from your competitors in your tradi- tional markets as the slow down at the end of 2014 takes hold. Training may also be the key to refocusing on new revenue streams. Problems facing India and China make them much less reliable markets and suppliers. Costs are shifting in favor of more production here in the United States. If we can continue to increase cheaper energy supplies, that will have a meaningful effect on our production costs. China and India put a new coal fired electric plant on line each week with none of our pollution safe guards. China and India put more pollution into the water and air than the rest of the world combined. The air pollution that areas like the U.S. West Coast and Yellow Stone National Park are experiencing comes from China not the U.S. While it takes slightly longer for the water pollution from China to reach the U.S., Chinese air pollution reaches the U.S. via the jet stream four days after China puts it in the atmosphere. As it becomes ever clearer that any real reduction in air and water pollution can only come from reducing imports from China and India, policy makers will have to shift attention to tariffs or other means to force China and India to either adopt U.S. level pollution controls or reduce substantially our imports for them. Business needs to begin focusing on what the impact of long term govern- ment policies are going to be on them. Each segment of the economy will experi- ence the 2014-2015 cycle change differently. We recommend an action workshop to determine how it will impact you. Knowing how to prepare over the next 12 months will make a difference. Call us; we can help. The Wise Old Owl

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