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Corporate America racked by uncertaintyPublished: October 9 2007 20:07Corporate America is braced for the worst period of economic uncertainty since the start of the decade as the credit squeeze and the housing meltdown heighten the risk of a US slowdown. US chief executives say the economic outlook has not been so difficult to read since the last recession in 2000-01. They warn that in spite of signs of a pick-up, the threat of an economic contraction is still alive.Conflicting economic indicators and volatile business conditions make it difficult to take strategic decisions such as whether to hire or fire staff, or increase or slash capital expenditure, business leaders told the Financial Times.They said they would watch the third-quarter earnings reporting season, which begins this week, to gauge whether companies had managed to cushion the twin blows from the housing crisis and the liquidity squeeze.Earnings growth is expected to have sagged to an average annual rate of 0.8 per cent in the third quarter, the slowest pace since 2002, Thomson Financial says. "I don't think anybody knows for sure exactly what the consumer is going to do this fall," Ken Hicks, the president of JC Penney, the department store chain, recently told investors.Chief executives of companies with international operations are more bullish, arguing that the weak dollar and solid global growth should offset domestic weakness.
Published: October 9 2007 20:07
Corporate America is braced for the worst period of economic uncertainty since the start of the decade as the credit squeeze and the housing meltdown heighten the risk of a US slowdown.
US chief executives say the economic outlook has not been so difficult to read since the last recession in 2000-01. They warn that in spite of signs of a pick-up, the threat of an economic contraction is still alive.
Conflicting economic indicators and volatile business conditions make it difficult to take strategic decisions such as whether to hire or fire staff, or increase or slash capital expenditure, business leaders told the Financial Times.
They said they would watch the third-quarter earnings reporting season, which begins this week, to gauge whether companies had managed to cushion the twin blows from the housing crisis and the liquidity squeeze.
Earnings growth is expected to have sagged to an average annual rate of 0.8 per cent in the third quarter, the slowest pace since 2002, Thomson Financial says.
"I don't think anybody knows for sure exactly what the consumer is going to do this fall," Ken Hicks, the president of JC Penney, the department store chain, recently told investors.
Chief executives of companies with international operations are more bullish, arguing that the weak dollar and solid global growth should offset domestic weakness.
[waits patiently to sound of crickets]
Printing more money is the Fed's typical answer, but we are on the verge of runaway inflation. We have printed so many dollars now that we are at parity with the Canadian dollar for the first time since 1976. Since the Fed stopped publishing M3, which tracks the total supply of dollars in the economy, we can't even be sure how many dollars they are creating. Reported inflation is around 2%, but the method for calculating inflation changed in the 1980's, largely at Mr. Greenspan's urging. Private economists using the original method find actual inflation to be over 10%, which matches more closely the pain consumers in the real economy feel.
