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US economy forcast for 2014

This is part of a talk I  gave today at  a bank in Scottsdale Arizona. The balance of my talk can be found at www.onebizcentral.com next week in the Leadership section.

 

I feel like a “flash speaker”… you may have seen those “flash mobs” that appear to do a spontaneous performance in some public space like a mall. I may not be qquite as entertaining but I hope you find this informative.

 

My name is Nick Petra; I am a Certified Financial Planner whose only practice is providing small businesses with consulting and coaching services. In addition to my own practice I serve as a volunteer mentor and coach with the Arizona Small Business Association and ASU Sky Song. I have been practicing in this area for over 25 years.

 

I am a small business advocate and believe that the future of our great country rests in the hands of small businesses. We are the ones that have to grow and prosper in order to bring back economic security to our great Nation.

Without going into a lot of boring statistical information I will share my views on the economy as it affects small businesses, first on the national level, then the state and finally here in our own back yard.

 

 

 

 

 

 

I am a great believer that every business should have a Strategic Focus Business plan as a growth tool.

 

This is the time of year that you should be working on the development of your plan. There are a lot of factors that go into the creation of a business plan and making sound economic assumptions is one of them.

 

By economic assumptions, I am not speaking about your company budget, although that is an important factor, I am referring to the overall economy that may impact your business decisions.

 

Each of you is an expert in your own business and perhaps that business is something other than being an economist. Today we find ourselves in a world of very varied economic forecasts, everything from the “doom and gloom” to next year being the best year ever. In between those extremes there are hundreds of other economic “gurus” ready to share their views on the future of our economy.

 

It’s hard to decipher these conflicting messages and even harder to incorporate them into a Strategic Focus Plan for next year.

 

To the best of my knowledge, no one forecaster has been accurate 100% of the time.

 

So who do you listen to? I will address that question at the end of this presentation.

 

 

Nationally, our overall economic growth will remain moderate – the overall economy should grow between 2 and 3 percent, adjusted for inflation.

 

The nationwide housing rebound has had the biggest impact on small businesses. The rebound even includes cities like Detroit as investors, both domestic and foreign, are buying bargain homer under $20,000 and commercial properties for much less than replacement costs.

 

As home prices increase, consumers gain more confidence and will return to buying more products and services. For small business owners, having equity in their homes, may once again provide a source of fund to invest in their businesses.

 

Businesses related to the housing market such as remodelers, plumbers, electricians, material suppliers, and so forth, will also benefit as they can grow their own companies and hire additional help.

 

One very interesting statistic that shows why the housing market is so important is because about one-sixth of all small private companies are in housing related fields.

Inflation is another important factor affecting economic growth. According to a recent Wall Street Panel the consumer price index increase is forecasted at 2.1%. The CPI is an inflationary indicator that measures the change in the cost of a fixed basked of products and services, including housing, electricity, food and transportation. The CPI is published monthly, it is also called the cost-of-living index and is published by the Bureau of Labor Statistics.

 

 

For many of us, the price we pay for a gallon of gas can have a major effect on the business bottom line. With all the uncertainty in the world and our own political maneuvering over our oil situation, the best I can hope for is a “status quo.”

 

Predictions are running from much lower gas prices to an overall increase. I don’t foresee a major increase next year, but if gas is a major factor in your budget, consider increasing your cash reserves for an emergency.

 

Interest rates are another important indicator. I believe that short term rates will remain about the same for 2014, but that most likely will not hold true for 2015. I do expect long term interest rates to rise slowly in 2014 ….

I recommend that if a loan is in your future, you should apply sooner rather than later.

 

I always like to know what other small business groups are saying about 2014. The following are exerts from an article I read recently:

  • The CEO’s of the 5,000 fastest-growing small companies are highly bullish.
  • 82% of them said that their prospects for 2014 are looking  good to excellent.
  • 80% said that they will hire new people as well as introduce new products and services.
  • Another worthwhile statistics is that the majority of these companies said that they had profitable years, even in the down turn. (that tells me something about their planning ability.)

 

 

I don’t want to say that all our worries are over as far as the overall US economy goes.

There are several factors that could still cause some problems.

  •  The Affordable Care Act
  • Grid lock in Washington
  • Consumers who read and believe in the “doom and gloom” forecast and live their lives accordingly. (why work, let someone else take care of me)

 

In summary, I believe that the overall US economy will do w ell in 2014.

Nick J. Petra CFP    www.strategicduck.com

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