U.S. Consumer Spending Increases More Than Expected
U.S. consumer spending increased more than expected during December, according to new government reports. Consumer purchases edged up 0.7 percent in December after increasing 0.3 percent in November, according to new data from the Commerce Department. In addition, incomes increased for a third month.
The economy grew during the fourth quarter at a 3.2 percent annual pace, according to the Commerce Department. Consumer spending increased at a rate of 4.4 percent, which is the highest since the first quarter of 2006, according to Bloomberg News.
Bloomberg also reported that 2010 holiday sales increased 5.5 percent. This represents the highest level in five years, according to data cited from MasterCard Advisors’ SpendingPulse.
Bloomberg said there was consumer demand for items such as clothing and jewelry.
“We feel great about the performance of the company, about how we’re heading into the first half of 2011,” Macy’s CEO Terry Lundgren told Bloomberg.
In addition, auto sales during December increased to a 12.53 million unit annual pace, Bloomberg reported. This represents the highest numbers since the federal government ran a “cash-for-clunkers program” during August 2009. Ford said its U.S. sales increased 15 percent during the fourth quarter.
Consumers may spend more after the Obama administration and Congress agreed in December to extend Bush-era tax cuts.
The news is good for CEOs and businesses in the United States. But the improvements need to continue – rather than be short-lived.
At least one analyst says they will. “The consumer is doing OK, and household spending will continue to grow this year,” Nigel Gault, chief U.S. economist at IHS Global Insight told Bloomberg. “We expect it to continue to play a part in this recovery.”
But many business leaders have recommended the government take more pro-business steps to increase the chances for continual economic improvements.
For more about consumer spending, as reported by Bloomberg News, please click here.
Cautious Optimism Is Feeling Coming from Leaders after Davos World Economic Forum
Many of the business and government leaders attending the recent World Economic Forum in Davos, Switzerland said economic growth needs to help the poor and unemployed. Paul Bulcke, CEO of Nestle SA, said that business and government have to promote growth in a way that increases employment.
“It is just imperative for all of us as companies and as countries to focus on saying that ‘I’m making our growth more inclusive,’” Chanda Kochhar, CEO of ICICI Bank Ltd., the largest private bank in India, said during the annual event. “Gone are the days (when) it’s just enough to say that some people will earn theirs, and then they will distribute. … I think the model has to shift to the grassroots to say, ‘Can we create enough basic stability plus employment generation opportunities for each and every of the small individuals … to participate in growth?’”
One issue of concern is that increasing cost of food may lead to inflation. China Ocean Shipping’s CEO Wei Jiafu predicted that increasing food prices could lead to increases in the prices of other commodities, The AP said.
In addition, increased prices and unemployment were among the reasons for last year’s anti-government protests in Asia and the ones underway in the Arab world.
Others at the forum also had concerns.
“The mood is much better here, but I’m cautious,” said Zhu Min, former deputy governor of the Bank of China who now works for the International Monetary Fund. “We should not be over-optimistic because we’re not out of the woods yet.”
His specific concerns include the European debt crisis, capital flow and income inequality, The AP said.
Jacob Wallenberg, chairman of Swedish-based Investor AB, is concerned about risks from the Euro, the level of U.S. debt, economic growth in Japan, and whether China will see a real estate bubble.
Zhu said China’s economy would grow by about 9 percent this year, and Kochhar said India’s would grow by “upwards of 8.5 percent.”
Ellen Kullman, chairman and CEO of DuPont, said 17 companies partnered with the World Economic Forum on “a new vision for agriculture.” They want to be able to improve conditions so poor farmers can afford to send their children to school and live a better life.
But even with the cautious optimism, there were more skeptical participants in Davos. Barrie Wilkinson warned that a 2015 financial catastrophe may take place, according to Bloomberg.Wilkinson, a partner at Oliver Wyman, told Bloomberg that, “The things that caused the previous crisis – loose monetary policy and trade imbalances – they’re actually bigger now than they were then.”
For more about the World Economic Forum, as reported by Forbes, please click here.
How To Create Innovation Across Functions while Conflicting Loyalties Are Present
When recently asked, “What are the top ten trends that will impact organizational strategy over the next five years,” 92 percent of senior executives questioned responded “the drive for innovation.”
Chris Ernst of the Center for Creative Leadership said the response shows that “integrating expertise and experience across functions is a powerful route to innovation,” according to a recent blog in the Harvard Business Review.
Leading employees across functions is hard to achieve, Ernst added.
Some 86 percent of the senior executives questioned said it was “extremely important” to collaborate across boundaries, but only 7 percent of them said that they did it “effectively.”
If faced with a corporate merger, an alliance with a foreign company, or other times when relationships need to be developed across functions, while still facing “conflicting loyalties,” Ernst recommends:
â€¢ Include leaders from other units at meetings of your team so you all can discuss how to help the others solve problems.
â€¢ Place comfortable chairs and a whiteboard in the corridor between two departments to encourage conversations across the functions.
â€¢ Following a merger, have a meeting for employees of both organizations who have similar functions. Together, come up with a “compelling mission.”
â€¢ If conflicts arise, have the units articulate their differences and find ways to resolve them.
â€¢ Invite everyone in an organization to a meeting to discuss what the transformed organization will be like five years from now.
For more about developing relationships across functions, while still having conflicting loyalties, as reported by the Harvard Business Review blog, please click here.