Retail Observer

RETAILOBSERVER.COM MAY 2015 32 W e are beginning to see some softening in the profitability of U.S. Corporations, a worrisome sign for the stock market. Economists believe that the nearly 20% increase of the U.S. Dollar against foreign currencies will have a chilling effect on revenue and the bottom line. The impact of a rising dollar creates a scenario where American made products are more expensive overseas and imported goods less costly here in the U.S. As a result, the market had an underwhelming earnings season as American manufacturers experienced declining sales in the fourth quarter of 2014. Guidance from many of our Fortune 500 companies was clear, the increase of the dollar against other world currencies and a global slowdown will negatively impact profitability for the balance of 2015. So what does all this mean? The stock market is in the sixth year of a bull market, one of the longest in U.S. history. We have watched as each earning season over the last 24 quarters have produced a continual rise in profitability. It looks as if that string is now in jeopardy as world economies are slowing and the dollar is negatively impacting U.S. sales overseas. It also raises the specter of extreme volatility in 2015, some of which we witnessed in the first quarter and the real possibility of a significant market correction when the Fed raises interest rates later this year. Some experts are saying that this potential move by the Fed is already accounted for in Wall Street's Q1 performance. This sounds like bad news but keep in mind that a rising dollar does not make U.S. goods more expensive in our country but it does reduce the prices of foreign imports. When Americans buy imports over domestic product it does lower our GDP. The positive direction that came out of the all this data that was recently released is that consumer spending, which accounts for about 73% of Gross Domestic Product, increased at a 4.4% clip in Q4 of last year. That is the best performance of consumer spending in eight years. Economists believe that with a near 60% decline in oil prices since June of last year and the addition of 3.3 million new paychecks from all the jobs created in 2014, that we could see a breakout year for consumer spending. In addition to the upbeat report about consumer spending, the Thomas Reuters University of Michigan Consumer Sentiment poll for March was just released. Even though the reading dropped from 95.4 in February to 93.1 in March, it is still at the highest level since 2004. Right now, Americans are feeling very positive about the next nine months. Another bit of good news came last month when the Commerce Department reported the unemployment rate dropped to 5.5% in March and that wages increased at an annual rate in 2014 at 2.0% . We have seen real wages stagnant in America for years but as the impact of supply and demand for labor begins to shift with lowering levels of unemployment, this trend toward higher paychecks is likely to continue through 2015 and beyond. This followed a study done by the Federal Reserve Bank of Atlanta in which they looked at job creation over the past four years. It has regularly been reported that America was moving to a part time economy, I even heard one news anchor claim that most of the jobs created in the past four years were at fast food outlets. Not so according to the study, their research said that of the 8.1 million jobs created between 2010 and 2014, that 95% of all jobs were full time. Keep your teams positive, consumers are feeling good and 2015 could be the year buyer's return to your store flush with cash. RO Joe Higgins Economic Viewpoint Joe Higgins began his career with General Electric with a degree in economics. Joe left GE and joined Whirlpool as National Director of Sales. Joe retired from Whirlpool in 2012 in a career that spanned two companies and 43 years in the appliance industry. For the past two years Joe has been speaking at conventions, seminars and sales meetings across America. His work includes presentations on the United States economy, leadership, creating a high perform- ance culture, healthy teams and customer service. Visit www.q4qwithjoe.com. STRONG DATA HINTS AT POSITIVE DIRECTION FOR U.S. ECONOMY IN 2015

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