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CEO Daily Brief – Jan. 10, 2011

Retail Sales Likely Increased in December: News Report There are reasons for CEOs to be cautiously hopeful about the outlook …

Retail Sales Likely Increased in December: News Report

There are reasons for CEOs to be cautiously hopeful about the outlook for the retail sector. Retail sales were expected to have increased for a sixth month in December, according to a report from Bloomberg News.

There are some basic reasons for the increase in retail sales. “When you combine improving economic fundamentals with a large amount of pent-up demand, that points to ongoing strength in retail sales,” Robert Dye, a senior economist at PNC Financial Services Group told Bloomberg. “We would need stronger job growth” for consumers to “lead the economy,” he said.

The increase in holiday sales comes even though that unemployment remains relatively high. The unemployment rate has been over 9 percent for 20 straight months.

Holiday purchases by consumers increased 5.5 percent, which is the best it has been since 2005, Bloomberg reports based on data from MasterCard Advisors’ SpendingPulse. The numbers include online sales as well as store purchases.

To see further gains, the government needs to reduce the number of mandates, regulations and health insurance requirements on the business sector. With fewer requirements, business can hire more employees, which in turn will help the economy and in particular, the retail sector.

For more about the economy, as reported by Bloomberg Businessweek, please click here.

 

U.S. Economy Faces Housing and Unemployment Risks

CEOs may need to be cautious about 2011 given varied trends in the U.S. and global economies, according to professors from the Wharton School. High unemployment and a weak housing market could hurt the growth projected for the U.S. economy during 2011, they said. Global forces, such as problems faced by the euro and inflation in regions such as China, Latin America and India, may impact the global economy, the professors add.

Wharton School finance professor Richard Marston said it does not appear the United States will face a double-dip recession during 2011. In addition, the recent bipartisan move to extend the Bush-era tax cuts is expected to help the economy, he said.

Housing is an issue for the economy, too. Wharton School professors said that the weak housing market will likely not hurt the economy further, and levels of new-home construction will probably not fall lower. A rise in mortgage rates has made homes less affordable. Higher unemployment means fewer consumers are looking for homes.

In addition, states such as California, face a debt crisis similar to the ones now occurring in Europe

U.S. economic growth could be hurt by debt in European nations. China raised interest rates to block inflation, which could lead to more foreign money getting invested in China, which means that other nations will lose out on money coming into their economies.

In addition, the United States is facing a large national budget deficit.

While there may be stock market gains in 2011, there is speculation that they may not be as strong as the ones seen in 2010.

As companies make contingency plans for 2011, they have to keep in mind the possible negative trends not just the hopes for a prosperous future. CEOs need to realize that global, national and regional trends could hurt the economy.

For more about the economy, from knowledge@wharton, please click here.

 

For MBA Grads It Will Take Longer to Break Even

It’s become harder for graduates of MBA programs to get return on the investment for the money they spent on their MBA degree. There have been tuition increases in many professional school programs, including MBA program. In addition, the graduates are facing lower starting salaries with fewer positions available.

Bloomberg Businessweek reports it now takes MBA grads almost an additional year to earn the money for their investment in top business school programs than was the case in 2008.

Two years ago, Bloomberg Businessweek calculated that it would take members of the MBA Class of 2008 an average of 5.6 years to recoup their MBA investment. For the Class of 2010, the number jumped to 6.5 years.

That does not just hurt the students. Companies need well-trained employees and managers to keep their businesses competitive in the current global economy. Where are the next generation of CEOs and other top executives going to come from without the influx of recent, highly-trained graduates of top MBA programs?

There are other options for students than going into the business sector. The loss of the talented students will not doubt hurt the business sector.

For more about the challenges facing graduates of MBA programs, as reported by Bloomberg Businessweek, please click here.

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