Month: November 2016

One of the largest changes in the economy that affects U.S. businesses is the direction of interest rates. Interest rates are typically lowered when the economy is sluggish and the Federal Open Market Committee — the group of Federal Reserve Bank economists who monitor the economy — decides that conditions warrant lowering. Interest rates are usually raised when the economy is picking up or strong, in an attempt to keep the economy from overheating and currency from inflating.

Since the financial crisis of 2008-2009, interest rates have generally been low. In fact, for the past several years, they have been at all-time lows.

What impact does that have on your business?

Well, lower interest rates mean that it’s less expensive to get loans. As a result, it’s easier do the things that a loan might pay for, such as expanding offices, hiring new people, and buying new equipment.

So right now might be a good time to expand.

However, because rates have been historically low for a relatively long period of time, it’s a good idea to keep an eye on the financial and economic news. Anything that stays at a historic low for a long time is bound to go up.

The FOMC usually raises rates gradually — 0.25% to 0.50%. But when they start to climb, they can do so for a while. The FOMC meets multiple times per year, and it can, theoretically, hike rates each time.

So rising interest rates could, in a few years, mean that it’s expensive to get loans. It’s a good idea to keep track of the direction and plan accordingly.

The serious challenges that the US manufacturing sector has seen in the past few months is the source of the ripple effect in the economy. That is not tied to a particular country alone, but the effects spread to other nations that trade with countries with such challenges. Here are some of the consequences of a slow manufacturing sector in the US. Export drags Inadequate production of finished goods in the industries means that there are fewer goods to export to meet certain deadlines. When that is the case, industries have to buy more time to produce adequate supplies to provide the right quantity, and this is what creates export drag. The US manufacturing sector has seen this become a reality in the past months, while on the other hand, imports are at a steady pace. Trade deficits Exports are a source of earnings to every country when they trade with other nation from the sale of raw materials, minerals, finished products, among other goods or services. Countries that are rich in various resources stand a better chance to realize more and better gains from such trading activities. Fewer exports in the US due to export drag mean that the effect on the economy is trade deficits. Sluggish international demand for goods Various aspects affect demand for products and services and when it comes to international trade, exchange rates, and global economic weaknesses are significant factors. The US manufacturing industry bears this history, since the dollar does not receive favorable exchange rates in other nations, and the weak worldwide economy, affects demand for goods negatively as well.