All posts by Alison Meadows

About Alison Meadows

Alison Meadows has a PHD in Economic Trends in Modern Times and is a known writer who focuses on hedge fund investments. Meadows, her husband, and three kids live in Boston, where she grew up and attended college. Contact Alison at alison[at]businessdistrict.com

Holiday Shopping May Suffer from Reverberations of Hurricane Sandy

Economy, , , , , , ,
Sandy’s Power Continues

Sandy’s power is extending beyond the immediate time and place her winds blew and waters surged as businesses see delays hindering their ability to get merchandise into stores in time for the holiday shopping season.

The superstorm not only closed down shipping terminals and covered warehouses with floor to ceiling water. Deliveries were also hindered by fallen power lines, blocked and closed roads, and severe gasoline shortages in New Jersey and New York.

At any other time of year this would be seen as a serious hinderance to business, but now, just as retailers usually begin to prepare for the frenetic shopping of the Christmas holiday season such a backup or cancellation of orders can spell complete disaster. For many merchants the holidays are when the bulk of their business is contracted.

“Things are slowing down,” said Chris Merritt, vice president for retail supply chain solutions at the trucking company Ryder. “This whole part of the supply chain is clogged up.”
Several examples include:

•    FedEx has rented fuel tankers to insure that its delivery trucks have a steady supply of fuel in the face of commercial stations running dry.
•    Ryder has been looking for trucks to rent to add capacity.
•    The major railroad company CSX has been advising their customers to expect delays at least 72 hours long on their shipments.
•    Retailers such as Amazon and Diane von Furstenberg informed customers to expect shipping delays.

Economic analysts are predicting that the storm will reduce economic growth by as much as a half of a percentage point in the last quarter of 2012. This is a large decrease considering the entire economic growth for all of 2012 was expected to be only about 1-2 percent.

Direct losses from Sandy are going to be much less than the losses caused by Hurricane Katrina in 2005, but the impact of Sandy may well be greater in its aftermath due to the dense population in the Northeastern states where Sandy let lose her destructive forces.

The Northeastern US is responsible for about $3 trillion in output, which is about 20 percent of the nation’s total gross domestic product.

“Part of what was lost will be delayed, but part is lost forever,” said Gregory Daco a senior economist with IHS Global Insight.

NYSE Opening After Hurricane Closes Trading for Two Days

Economy, , , ,
Hurrican Sandy Closes NYSE

Wall Street hunkered down on Monday and Tuesday as Hurricane Sandy blew through the region, leaving unprecedented destruction in her wake. But with minimal damage on the prestigious New York Stock Exchange trading floor and hours of preparation and testing of electronic communications systems, the exchange is going to open normally at 9:30am on Wednesday morning.

Peter Anderson, a senior portfolio manager at the Boston-based Congress Asset Management firm said,

“There will be no Halloween costumes on the New York Stock Exchange when the market opens back up because there will be a great deal of tension just in terms of restarting the markets and making sure … trading goes smoothly.”

The forecasting company IHS Global Insight is predicting damage from Sandy could amount to as much as $50 billion. In contrast last year’s hurricane/tropical storm Irene was the cause of $4.3 billion in insured damage.

IHS is saying that property damage could reach about $20 billion and lost business revenue may amount to $30 billion. Together the losses could reduce US overall economic growth by 0.6 percentage points in the last quarter of 2012. Retailers, airlines and home construction firms will most likely be hit hard.

 

Consumer Spending Up in Third Quarter

Consumerism, Economy, , , ,

The end of the third quarter produced some good economic news, sending hopes that the economic recovery is picking up momentum. According to the economic data which was released on Monday retail sales in the United States went up in September as Americans made more purchases of just about everything, from cars to electronics.

In less good news manufacturing slowed in again October in New York State, although the size of the shrinkage was not as large as September’s manufacturing slowdown.

Retail sales advanced at a pace faster than what was originally expected; 1.1 percent in September, according to Commerce Department data.

This increase in consumer spending is great news for the economy because purchasing accounts for as much as two-thirds of economic growth.

“This is a good end of (the) third quarter and we have some good momentum to the fourth quarter,” said Craig Dismuke, an economic strategist at Vining Sparks in Memphis, Tennessee.

NABE Survey Says Economy Slow, Housing Market Up and Fiscal Cliff Avoided

Economy, ,
Shawn DuBravac, Chief Economist for the Consumer Electronics Association

There is good and bad economic news. The bad news first: economists are now predicting dawdling growth during 2013, with an upswing in the unemployment rate back to over 8 percent for at least the first half of the year.

Yes, there is some good news to assuage the bad: the recovery of the housing industry is heading upwards more quickly than expected and there is a very high likelihood that the economy is not about to fall over a “fiscal cliff.”

The good and the bad and the ugly news was derived from the quarterly survey of the National Association for Business Economists. The poll questioned 44 economists about how they see the economic future of the country.

NABE is an organization composed of business economists and other professionals who use economics in the workplace.

The survey was conducted during the 12 days between September 14 and 26. The best news issuing from the survey concerns the expectation that new housing starts for single-family homes will rise by 23 percent, totaling 750,000 new units for 2012, and a continuing rise in 2013 of about 13 percent, for a total number of units of 850,000.

Home prices are also expected to rise by 1.5 percent in 2012, and 2.8 percent in 2012. This is a higher estimate then the economists gave back in the May survey.

It also seems we are not heading for a fall of a “fiscal cliff.” Despite concerns of the budget deficit and national debt and what the combined $1.2 trillion in spending cuts and tax increases will do to the economy, most economists seem to believe that a giant fiscal explosion will not take place.

‘‘The panelists’ projections for the fiscal cliff are very diverse, though survey respondents in general do not expect the potentially large negative outcomes of the fiscal cliff to materialize,’’ said Shawn DuBravac, chief economist at the Consumer Electronics Association, who analyzed the results for the NABE.
 

Less Spending Predicted this Holiday Season

Economy, , ,
The NRF is Predicting Slower Spending this Holiday Shopping Season

The largest retail trade organization in the world, the National Retail Federation, announced on Tuesday that the economy will most likely see a rise in holiday sales this coming winter of only 4.1 percent, a number reflecting slower growth than what was seen in the past two years.

The prediction states that retail sales in November and December, normally the strongest months for retail shopping, will be approximately $586.1 billion, a rise of 4.1 percent over last year’s sales. Contrast this number with the 5.6 percent increase in sales in 2011, and 5.5 percent in 2010, and you can see why retailers are worried about the future.

To understand the importance of this number, which is one of the most-watched benchmarks for the health of the economy, just consider that holiday sales which take place almost exclusively in November and December make up as much as one-third of annual sales. Combine that with the fact that 70 percent of the US economy is made up of retail sales, and it is easy to see how the NRF forecast and inspire or frighten retailers, economists and investors.

What is holding back consumers this year is lack of confidence. Will legislators agree to turn away from the “fiscal cliff” of across-the-board spending cuts scheduled for January 2, 2013, not to mention tax hikes for everyone, or will the country head straight over the side?

“It’s the uncertainty about where the economy is going, the uncertainty at the federal level about the fiscal cliff, the absence of a path forward from the president and the Congress,” NRF President Matthew Shay commented.