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Grow into the North American Aerospace Industry

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Launch into the Aerospace Market in the Southeastern United States – update # 3

The Global Market Forecast and the new Chief Commercial Officer, Eric Schulz, Chief Commercial Officer by Airbus anticipates 37,400 new deliveries over the next 20 years with a current fleet of 21,500!

The value of it …$5.8 Trillion aircraft value!A320

10,600 aircraft will stay in service from these days.

Interesting to know that 54% ($3.2 Tn) in value is expected from small body i.e. 230 seats and 3,000 nm range and 25% ($1.4 Tn) from medium body i.e. 300 seats and 5,000 nm range.

Also, a growth of 10% ($0.6 Tn) in large body and 11% ($0.6 Tn) in XL categories are expected as well.

Backlog market shares of Airbus is 88% in medium body (A321 LR and A330 neo), 54% in smaller airplane (single-aisle plane). For larger plane, the backlog is 52% for L – A 350 XWB and 35% for the XL segment (A 380, A350-1000).

Like its peer, Boeing Current Market Outlook (CMO) is dedicated to forecasting new airplane demand over the next 20 years. In many ways, it paints a picture of the future of flight.

B737

Although the numbers do not match the analysis of the trends is the same.

Based on the CMO from Boeing, it anticipates 41,030 deliveries over the next 20 years with a current fleet of 21,500!   

The value of it …$6.1Trillion aircraft value!

3,070 additional planes will be flying over the US to reach 10,130 planes in active duty.

In a nutshell see the executive summary of this Market Outlook as below:

Boeing Global Forecast 2017-2037

Do you want a “piece of the Business”? Question is more …how, right? Then, let’s check below first…

Florida’s NASA rocket ships aren’t the only ones in the Southeast lifting off at high speeds. The aerospace industry is the fastest growing industry in the region. Georgia, Alabama, Florida, Mississippi, North Carolina, South Carolina and Tennessee have collectively become an industry leader, with major firms setting up manufacturing sites all throughout the area.

See the map prepared by The Georgia Electric Membership Corporation below:

aerospace SE map 2018

Foreign firms are attracted to the U.S. aerospace market because it is the largest in the world and has a skilled and hospitable workforce, extensive distribution systems, diverse offerings, and strong support at the local and national level for policy and promotion. According to a study by the U.S. Department of Commerce, aerospace exports directly and indirectly support more jobs than the export of any other commodity. Investment in the U.S. aerospace industry is facilitated by a large pool of well-trained machinists, aerospace engineers, and other highly skilled workers with experience in the aerospace industry.

The graphic on the right below illustrates how aerospace exports in the Southeast have been outpacing overall U.S. aerospace exports, increasing by 180 percent from 2006 to 2016, 2.3 times the growth of U.S. exports. Georgia has been substantially overtaking both the Southeast and U.S. overall. Georgia’s aerospace industry exports account for 30 percent of all aerospace exports in the Southeast, followed by Florida with 25.9 percent and South Carolina with 24.7 percent.

Exports Aerospce GA

Georgia Aerospace economic impact has been estimated at $63.8B by the Georgia Economic Development ,12% increase over 2013. 99,000 highly skilled workers are employed by 800 + Companies.

Investors in the U.S. aerospace industry are supported by the Federal Aviation Administration’s (FAA) “gold standard” of aviation safety, boosting the confidence worldwide in the safety of aircraft and aircraft parts manufactured in the United States.

State Specialties

Each state has its own special advantages and contributions that strengthen the industry:

  • Georgia: According to PWC, Georgia ranks #1 overall for aerospace manufacturing attractiveness. Georgia houses more than 800 companies in the aerospace industry, along with a business climate consistently ranked as one of the best in the country with a business-friendly tax code and other incentives. Aircraft manufacturing accounts for more than 70 percent of all employment in Georgia’s aerospace industry, followed by other air transportation support activities and aircraft engine and engine parts manufacturing with 12.2 percent and 9.2 percent, respectively.
  • Florida ranks #2 among states for aviation and aerospace establishments, with more than 2,000 companies employing 82,500 workers. These businesses export more than $5.2 billion in goods annually, making Florida a national leader in these sectors.
  • North Carolina is now second in the U.S. in aerospace growth, and hosts two of the top 10 aerospace and aviation clusters in the South. The state justifies such growth due to unique industry research advantages, 9,500+ aerospace manufacturing employees, cost advantages, and more.
  • Mississippi is home to some of the world’s most renowned names in aerospace: GE Aviation, Airbus Helicopters, Rolls-Royce and Lockheed Martin. All rely on a skilled and productive workforce, comprehensive workforce training, a supportive business environment, a strategic location, low startup and operation costs, and cutting-edge R&D.
  • Over 300 aerospace companies from more than 30 different countries have chosen Alabama, including industry giants such as Boeing, Lockheed Martin, GE Aviation, Raytheon and GKN Aerospace. Another of these giants is Airbus, which now produces its A320 Family passenger jets at a new $600 million manufacturing facility in Mobile.
  • Some of the world’s top aerospace and defense companies operate facilities in Tennessee, including Vought Industries, Beretta USA, Eaton Corp., Standard Aero Alliance, Honeywell, Barrett Firearms Manufacturing, BAE Systems Ordinance and Bell Helicopters, with more on the way.
  • The total economic impact of aerospace on South Carolina’s economy is $19 billion per year. There are approximately 400 aerospace companies in South Carolina and four aviation related military facilities. These companies and facilities combined employ more than 53,000 people. Of the 17,000 employed in the private sector, approximately 72.2 percent of employees are in manufacturing, 17.8 percent of employees are in air transportation support, and 10 percent are in air transportation.

Ideal Business Environment

Many factors are guiding aerospace firms towards the Southeast:

  • Strong economy – the Southeast is one of the nation’s most robust economies, with a GDP of $3.8 trillion in 2015, which represents nearly 21 percent of the U.S. economy as a whole
  • Growing workforce – the region accounted for 17.9% of all U.S. workers in 2012
  • Growing population – population growth in the Southeast outpaces that of the U.S. overall due to the excellent weather and economic climate, and is currently home to 25.75% of the U.S. population
  • Well-educated population – the Southeast has some of the nation’s top colleges and universities
  • Low unionization – unionization rates in the Southeast are low and continue to decline
  • Low cost of doing business – for major cost measures, most Southeastern states are below the national average

Proximity to numerous space launch facilities in the Southeast helps aerospace firms lower the cost of doing business in logistics, manufacturing and R&D, while positioning them to capitalize on the emerging space market.

The Southeast can present a lucrative opportunity for any aeronautical company looking to invest. But given your company’s particular needs, what would be the ideal market entry strategy? Mergers and acquisitions? Setting up a U.S.-based sales office? Finding a partner to penetrate the market? Direct sales?

Each heterogeneous region of the United States presents its own unique advantages and challenges. Foreign firms need a partner – an expert hands-on in the region’s aerospace business environment – who they can count on. Proper planning and a well-researched approach can put companies on the right flight path for growth and profitability. And passion!

Please contact COGNEGY with any questions you might have: phil.jafflin@cognegy.com

Aircraft, Engine & Parts Manufacturing In the US: A Leaner, Quicker & Brighter Future

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The aircraft, engine and parts manufacturing industry is climbing due to rising fleet replacement and global air travel, which is driving demand for more commercial aircraft and associated parts.

Key Statistics Snapshot according to IBISWORLD:

key statistics 2018

Market Shares for key US players:

The Boeing Comp 33.9%
GE Aviation 8.5%
Lockheed Martin Corporation 7.7%
United Technologies Corporation 6.7%

Airlines around the world are seeking to upgrade their fleet to newer, more fuel-efficient models. In particular, economic growth in the U.S. and in emerging markets has increased global air travel traffic and enticed airlines to expand their fleets. Year-over-year passenger travel growth for the past five years has averaged 6.2 percent. Low air fares, higher living standards with a growing middle class in large emerging markets, and the growth of tourism and travel relative to total consumer spending in major economies are all driving strength in the demand for air travel.[1] As a result, Boeing and Airbus have surplus demand for aircraft, with combined backlog orders of over 9,000 commercial aircraft.

Breakdown of the total US revenue of $240 B

breakdown of 240B

Key External Drivers:

  • Demand from air transportation
  • Federal funding for defense
  • Non-Nato defense spending
  • Trade-weighted index (The trade-weighted index (TWI) measures the value of the US dollar against the currencies of its largest trading partners. A decreasing TWI leads to lower export prices and higher import prices.

The United States is prepared to soak up this demand. The U.S. is the largest aircraft manufacturer in the world, and is home to the leading companies in the large commercial aircraft, combat aircraft, helicopters, unmanned aerial vehicles and engines segments. In the commercial aircraft segment, Boeing dominates, as it is the only U.S. manufacturer of medium to large size airliners. Since U.S. companies like Boeing hold such a strong market position, any increase in demand by international airlines for new aircraft typically leads to increased demand for U.S. planes.

In a 2015 PwC report, the U.S. was ranked as the top location for commercial aircraft manufacturing. Countries were ranked on several variables, including costs, industry size, and infrastructure/stability/talent. The U.S. ranked first out of 142 countries, despite only moderate grades in the cost and infrastructure/stability/talent categories, because it’s the largest in terms of industry size.

U.S. companies are seeing enormous opportunities to partner with foreign firms in hopes of gaining market shares in new regions. U.S. manufacturers across the supply chain – from makers of engines to electronics and communications systems to airframe parts – have already made quick strides to partner with emerging aviation manufacturers, but this looks to be simply the beginning of a much more globalized industry.

Expansion in global markets carries numerous risks, including but not limited to intellectual property protection, talent recruitment, training, and retention.

Finding a right partner for manufacturing in dollars might be a huge opportunity to drive your global business further.

COGNEGY has successfully worked with foreign companies in advanced industries who want to enter the U.S. marketplace. COGNEGY’s Atlanta, Washington, Philadelphia locations, staff of C-level executives and extensive experience provides foreign firms with a hands-on, trusted partner well versed in the local business climate to map out an partner search and acquisition or a customized plan for corporate growth.

Please contact COGNEGY with any questions you might have: e-mail phil.jafflin@cognegy.com  or call +1 (404) 917-7100 extension 903

 

[1] Boeing Current Market Outlook, 2017-2036, page 7

[2] http://usblogs.pwc.com/industrialinsights/2014/01/20/globalization-pressures-lessons-from-the-us-aircraft-industry/

US MARKET PENETRATION BY ACQUISITION in 2018

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Market Penetration by Acquisition

Mergers & Acquisitions – Buy Side

Corporations and private equity firms foresee an acceleration of merger and acquisition (M&A) activity in 2018, particularly in terms of the size of those transactions. From a sector perspective, technology and healthcare will drive M&A activity in North America because of the U.S.’s strength in tech innovation and the aging populations in advanced economies. Further consolidation within the energy and raw materials sectors should also continue to generate transactions in the coming years.

Companies involved in M&A have been most interested in acquiring relevant technologies. This in addition to expanding customer bases in existing markets, adding to product offerings and diversifying services rank as top three strategic imperatives. M&A also helps companies improve synergy, diversify, grow, expand their products and increase supply-chain pricing power and market share.

Some factors that have made foreign direct investors (FDIs) favor the U.S. for M&A deals include the recent slow international growth, political crises & ongoing wars in certain areas of the world, along with global economic uncertainty. Despite this uncertainty (listed as a key concern in Deloitte’s 2018 M&A Trends Report), M&A is rising to the forefront. FDIs can use M&A as a tool for both smaller, strategic, niche acquisitions as well as bold transformative deals.

In PwC’s Global CEO Survey, four out of 10 CEOs said their companies are targeting the U.S. for their growth prospects. That was reflected in the 6% rise in inbound deal volume through Q1 2017. A few months later, the pace picked up, with year-over-year volume up 10% through May. This could be a sign that overseas businesses are looking to the U.S. to compensate for uncertainties in markets such as China, South Korea and Russia, where economic prospects aren’t as stable. These survey findings are consistent with other analyses, such as a UNCTAD forecast that the U.S. will be the favorite investment destination of global business through 2018, followed by China and India.

As markets adjust to ongoing political and regulatory changes, the M&A market should be buoyed by strong fundamentals and the potential for pro-business policy changes. In particular, opportunities may emerge from potential new U.S. policies, such as cash repatriation, corporate tax reform and more modest regulation.

Fears of increasing protectionism in 2016 morphed into uncertainty about policy that could affect global trade. However, despite trade barrier speculation, cross-border M&A has already been a hallmark of deal making in 2017, with a resurgence of deals between the U.S. and Western Europe. Companies are looking everywhere for pockets of growth, although the main focus has shifted back to developed markets, according to the EY 16th Global Capital Confidence Barometer (CCB).

Sluggish economic growth slowly spread out throughout the world over the past six years has made it more difficult to find the right partner for accelerating business growth. Only 1 out of every 6 investments by venture capitalists in the U.S. delivers its projected return on investment.  With such dim prospects, how can FDIs take advantage of the M&A momentum, hasten their business growth, and overcome deal barriers?

Companies get the most out of their M&A deals with proper focus, preparation and execution. There is no substitute for a well-thought-out M&A strategy and a solid execution plan to improve prospects for the completion of a successful M&A deal.

COGNEGY can help FDIs every step of the way. COGNEGY has teamed with many foreign firms to identify the right target, engage in project discussions, perform both business and legal due diligence (with trusted partners), outline business valuation, craft deals, negotiate, integrate, and accelerate growth.

Please contact Phil Jafflin with any questions you might have: phil.jafflin@cognegy.com

Shift Gears Towards the Automotive Industry in the Southeastern United States

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When thinking of investing in the U.S. automotive industry, thoughts often lean towards the Detroit, Michigan area. Check again – the rapidly expanding Southeastern Automotive Corridor has become the new epicenter of automotive manufacturing growth in the United States, abundant with strong networks and growth potential.

Georgia, Alabama, Florida, Mississippi, North Carolina, South Carolina and Tennessee have collectively become a key industry driver for the U.S. automotive market – one of the largest in the world. This comes as no surprise as the Southeast is home to both 25.4% of the U.S. population and one of the nation’s most robust economies, with a GDP of $2.4 trillion – representing nearly 15.5 percent of the U.S. economy as a whole.

More than 1,060 automotive firms are located throughout the seven states. The region hosts 16 major auto, truck, and bus assembly plants for leading companies such as Hyundai, General Motors, BMW, Honda, Kia, Volkswagen, Toyota and Blue Bird. Mercedes-Benz and Porsche both maintain North American headquarters in Atlanta, GA, and Nissan holds theirs in Franklin, TN.

auto-_-se

Map and Research by Georgia Power

Business Facilities magazine named Tennessee the top state in its Automotive Manufacturing Strength ranking for five of the past six years. The Nissan plant in Smyrna, TN is the most productive plant in North America, producing 633,347 automobiles in 2015. Southeastern states exported nearly $28 billion in motor vehicle, motor vehicle bodies and trailers and motor vehicle parts in 2012, accounting for 62 percent of total transportation equipment exports. Consumer demand is on the rise – new vehicle registrations in the area are expected to grow from around 3 million to 3.1 million between 2016-2020.

The Southeast’s sound economy, stable and growing workforce, low unionization, right-to-work status and low costs of doing business provide additional incentives for automotive leaders to drive towards the region. The Southeast can present a lucrative opportunity for any automotive company looking to invest. But what is the best approach? With the right partner to help plan the ideal market entry strategy through M&A or else, investing in the Southeastern automotive sector can put firms on the right track for growth and profitability.

Please contact COGNEGY  with any questions you might have or email us at phil.jafflin@cognegy.com

 

Value Proposition and Trust

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This article is about the difference between perception and reality, between what you think about the US market and what the US market thinks about you.

In other words, we are having a conversation about the reasons why Americans might hesitate to buy your product, even if it is clearly a superior one. It is about what needs to be done to bring them over the edge, and get them to sign an order, a distribution agreement, or a letter of intent.

The American market is abundantly supplied by US and established foreign producers, offering just about everything: quality, diversity, service, information and competitive prices.

Because of its size and high degree of sophistication and standardization, the US market attracts newcomers, American and foreigners, every day.

In other words, it is not an easy market to penetrate.

Thankfully, Europeans usually offer products with a great value proposition; products they think will be hard for Americans to resist. 

This may be true, but a great value proposition doesn’t tell the whole story.

Americans are often labeled as chauvinistic when they appear to prefer “Made in USA” products rather than the “superior solution” Europeans are offering.

In reality, US potential partners and customers are usually open to foreign-made products, as long as they can get something substantial (money, status…) out of them. Their first question will be: What’s in it for me?

But if this first question is easy to answer (great value proposition!), it is immediately followed by a number of worries, questions that may not be expressed, and boil down to trust. To his colleagues, your American contact may be saying something like: “Their product looks great, but can we trust these guys?” 

 

Let’s go over a few of these worries.

How long have they been doing business in this country?

Even if you export to 50 different countries from Lithuania to Malaysia, what your US partners are really concerned with is the South, or MidWest, or whichever region the market is. Worries: What is their local presence? Do they have US references? What have they already achieved in the US? Do they know the competition? Are they member of our industry association?

How important is the US market for them?

This question really means: How long will they stay here? No one likes to invest time and resources in a project that might be abandoned as soon as the Euro starts climbing again. If they have a feeling that you are over-optimistic or unprepared, they might worry about the unpleasant surprises you will face. Worries: How much funding have they set aside to sustain their market entry? What is their expected pay-back period? Who will manage the US operation? How profitable could their US operation be? How much personnel are they hiring?

Where is their US operation located?

Even when your market penetration strategy is based on a well-structured agreement with a US distributor, the frequency of your presence in the United States will often be critical to your success. European mid-sized companies have a tendency to be understaffed, especially the successful fast-growing ones. Travel time to, from and inside the USA takes a toll on overworked management. Worries: Who will take care of sales rep training and motivation programs? How and when will they visit our 178 points of sale? Will they attend our quarterly meetings? Who will prepare the next trade fair?

What are their marketing tools?

Even if English language literature is available, it may have to be put to the test. US terminology and spelling are considerably different from anything you have seen in Europe. Americans are not used to brochures in three different languages, and regular references to European standards or units will raise eyebrows. Poor English syntax or literal translations from a European idiom will make Americans smile, but are not conducive to a strong relationship. Worries: What do they mean with “spanner” and “gearbox”? Will they start using a US marketing agent? How good is their website SEO? Do they have a speaker for the upcoming conference?

Their technology looks great. How about their after-sales service?

Americans will hardly be reassured when told that “our technicians speak English”. They want to know where the service team is located, how long it will take them to fix a breakdown or replace critical parts. Your US partners don’t want to call and leave a voice message to a recorder located 6 or 9 time zones away. Worries: How many technicians do they have on the east coast? How were they trained? Do they also work for other companies? Where do they store spare parts?

Finally, the entire trust issue also depends on whether a bond is created between you and your American partner, between your people and theirs. This is chemistry. Inviting them to visit your company in Europe, or spending time visiting their offices and plant will go a long way.

 

All the above worries will have to be addressed, whether they have been expressed or not.

A market analysis, strategy, marketing and financial plan professionally prepared by US-based COGNEGY is likely to inspire the confidence that your US partners are seeking. You will have all the solutions ready to answer their worries. This is what we have done for over 30 mid-sized European companies in the last 30 months.

After all, if your company has spent decades to develop, produce and market great products all over the world, it would be a shame to stumble on America’s shores because of worries that have little to do with these products. 

Coconuts or Peaches…

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When in Belgium while on a business trip, I was interviewed by Benny Debruyne of Trends Magazine – probably the business weekly in Belgium – on the pitfalls of ‘doing business’ in the United States. The product of this conversation became the article that was published a couple of days ago.

Here is the link to the full article – ‘Europeanen zijn als kokosnoten, Amerikanen als perziken’ – (‘Europeans are like coconuts, Americans like peaches’). For the non-Dutch speakers among our readership –  the author heard me talk about many things, but distilled these 5 pitfalls:

  1. send the wrong scout
  2. consider the US as one single market
  3. underestimate the legal side
  4. move too eagerly
  5. be too modest

About the title, the quote is not mine – I read it somewhere, but cannot recall who actually said it first. It stuck because it describes both cultures perfectly, Europeans are like coconuts: hard on the outside, but soft on the inside. Americans are like peaches: very open and accessible, but can be a hard nut to crack!

 

Are changes to Visa Waiver Program affecting you?

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If you traveled to Syria, Sudan, Iraq or Iran, the USA will now require you to apply for a visa, instead of allowing you to enjoy the visa waiver program to enter the United States. This major change in policy will affect quite a number of business travelers.

Like most Western Europeans, you have most probably traveled to the United States of America enjoying the simplicity of the Visa Waiver Program that is in place with some 35+ countries, including Belgium, The Netherlands and France. Some major changes were announced on January 21st, that could affect your future travel plans.

Recently, the press has covered instances of dual national citizens who have been refused entry to the US. The story of a dual-national British journalist, on her way to visit relatives in the United States, is a perfect example. Read here – bbc journalist.

Probably less known is a second category of travelers directly hit by the changes implemented under the ‘Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015’. Nationals of countries that enjoy the visa waiver program, and have traveled to the aforementioned countries after March 1st, 2011, are affected. A press release from the Department of Homeland Security states that:

“Under the Act, travelers in the following categories are no longer eligible to travel or be admitted to the United States under the Visa Waiver Program (VWP):

  • Nationals of VWP countries who have traveled to or been present in Iran, Iraq, Sudan, or Syria on or after March 1, 2011 (with limited exceptions for travel for diplomatic or military purposes in the service of a VWP country).
  • Nationals of VWP countries who are also nationals of Iran, Iraq, Sudan, or Syria.”

Here is the link to the press release: http://www.dhs.gov/news/2016/01/21/united-states-begins-implementation-changes-visa-waiver-program

The same press release reassures that visa requests can be processed on an expedited basis for individuals who require a visa for “urgent business travel”. Furthermore, the release clarifies that:

“…any traveler who receives notification that they are no longer eligible to travel under the VWP are still eligible to travel to the United States with a valid nonimmigrant visa issued by a U.S. embassy or consulate. Such travelers will be required to appear for an interview and obtain a visa in their passports at a U.S. embassy or consulate before traveling to the United States…”

Forewarned is forearmed. Check your travel of the past 5 years, because coming to the US for business might now require a little more effort on your part.

If you have questions you can always contact me (although I am not a lawyer), or your favorite immigration lawyer.

 

A great location…

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Identifying the optimal location for a business’s first steps on the US market, is a crucial decision in the business development process.

Earlier blogs (read location…location…location) described how foreign direct investors should search for the right mix of elements. Take into account where customers and competition, but also vendors are located; what incentives and support are offered; what caliber of employees can be found, without forgetting about time zones, cost of living, legislation, climate and connectivity.

This made Renuka Rayasam’s article on Atlanta a great read, defining it as a great location to work and live. We can confirm. She also points to the recent influx of major companies who have recognized this by relocating to the Big Peach. Daimler-Benz’s recent announcement attracting most of the headlines. We are certain more are to follow.

Read the article here: http://www.bbc.com/capital/story/20150331-beyond-the-worlds-busiest-airport

U.S….What’ s up doc?

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The food industry is largely dependent on consumer spending and economic growth. Therefore, this is valuable to have an overall understanding of the current trends before investing.

The two most widely followed indicators of consumer confidence jumped to the highest levels in seven years last week. The Conference Board reported Tuesday November 4, 2014 that its Consumer Confidence Index climbed to 94.5 in October, the strongest reading since October 2007 before the economy entered the Great Recession.
The solid increase suggests consumers largely dismissed concerns about slowing global growth and have ignored the sharp swings in financial markets in October. Instead, greater hiring and lower gas prices are boosting their outlook.
US consumer confidence rebounded strongly in October, hitting a 7-year high as solid job gains and falling gas prices raised expectations for economic growth. This came despite slowing economic growth in Europe and China that has fueled volatility in financial markets.

Then on Friday October 31, the University of Michigan’s Consumer Sentiment Index rose from 84.6 in September to 86.9 in October, the highest level since July 2007. It was the third consecutive monthly increase in this Index. Respondents to both surveys cited expectations of better economic growth and job gains in the coming months, along with falling gasoline prices, as reasons for their optimism.

On Thursday, October 30th advance report on 3Q Gross Domestic Product came in at a better than expected 3.5% instead of 3% following the 4.6% showing in the second quarter. According to the advance report, the increase in GDP in the 3Q primarily reflected positive contributions from consumer spending, exports, nonresidential fixed investment, federal government spending and state and local government spending…
The Fed has also taken the decision to end quantitative easing (QE) last Wednesday. A further analysis of the official statement released after the policy meeting yields more clues as to when the Fed might start raising interest rates finally.
Second, as for US inflation, which is running below the Fed’s target of 2%, the Fed noted that falling energy prices are the main reason inflation has retreated as of late. They expect inflation to increase modestly when energy prices bottom out.

Yet at the same time, the latest polls on the Direction of the Country show that a 66.0% of Americans believe the country is headed in the wrong direction with only 27.8% who believe the nation is moving in the right direction. There is a huge disconnect between these measures of consumer confidence versus how Americans feel about the direction the country is headed.
So the question is, how can consumer confidence be at a 7-year high when two-thirds of Americans believe the country is headed in the wrong direction?
As always, the economic signals are mixed. However, the headline numbers over the last year support the public’s optimism.
It is true that a big increase in defense spending and a drop in oil imports accounted for a good part of the stronger growth in GDP this year. Moreover, true, too, spending on business equipment (+7.2%) and by consumers (+1.8%) grew more slowly in the 3Q than in the previous quarter, but at least such spending did expand.
The Fed has done its part, arguably, by holding short-term interest rates near zero for the last five years and buying trillions of dollars of long-dated Treasury bonds and mortgage-backed securities to keep long rates low. While the Fed did end its QE bond-buying program as promised, it committed to keep short rates near zero for a considerable time.

Then there are those anecdotal statistics that are useful supplements to the more closely followed government reports:
o Gasoline prices are plunging as new supply exceeds shrinking demand, putting cash into consumers’ pockets just as the holiday season starts. The rule-of-thumb is that every 1-cent-per gallon price decline adds $1 billion to consumer purchasing power.
So the 30-cent drop in the past month gives consumers $30 billion more to lavish on toys, apparel, and, of course, iPhones. In addition, economists estimate that every $1 decline in gasoline prices is associated with a 10% increase in sales of cars and trucks, especially of highly profitable SUVs and light trucks.
o Hundreds of thousands of holiday jobs are available. The seven largest retailers have 400,000 openings that are proving so difficult to fill that employers are “bombarding customers’ inboxes and Twitter feeds with help-wanted ads,” according to the Wall Street Journal. Many retailers ring-up between 25% and 50% of their annual sales in the next few months.
o Profits of leading corporations are up, and after some violent gyrations, the S&P 500 Index is up over 10% from the record level reached at the end of last year. This is good for investors and suggests a strong holiday shopping season.
o Finally, Apple’s iPhone 6 and 6Plus accounted for an estimated 10% of all recent US economic growth, adding 0.3% to overall GDP. Innovation is always a good thing.

Taken together, the economic news does explain the uptick in consumer confidence, although that confidence is dampened somewhat by gloomy economic news from Europe, China, Brazil, Russia, and other countries, as well as by stagnant middle-class incomes, and a job market that could be stronger. The improving economic outlook marches in parallel with a largely bipartisan fear that the institutions of government are just not fully working.

The legislative branch, Congress, is dysfunctional. Democrats are split between moderates appealing to independent voters and the left that is rallying the party’s “core” to remain on a “progressive” path to the 2016 presidential election. Republicans are afraid to speak out on politically sensitive issues and are divided by the Tea Party that sees compromise as weakness.
Other institutions are also in ill repute. The Centers for Disease Control, once the most widely respected government agency, fumbled its response to Ebola, unnerving a public that once looked to the CDC for guidance when faced with a health scare. The Department of Veterans Affairs is unable to deliver adequate healthcare to the nation’s veterans. .
All of this has to be a big part of why two-thirds of Americans believe the country is headed in the wrong direction long-term, even as confidence in the short-term is riding high.

However…Consumer Confidence Hit a 7-Year High in October!

 

Reference: Gary D. Halbert and Investors Insight.

Flemish exports reach record height in 2013

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According to an article in the Flemish newspaper De Tijd exports from Flanders – one three regions in Belgium, the others are Wallonia and Brussels – grew in 2013 to a new record height. In comparison with the previous year exports increased by 1.64% to 294 billion euro. Flanders represents 83% of all Belgian exports. All the numbers originate from Flanders Investment and Trade.

Aside from all these positive macro-economic data, COGNEGY itself has seen a growing interest for the US market by many Belgian SMEs. More feasibility studies than ever before are being run, and more client businesses are enjoying our support with the execution of their growth strategies on the US market.
Another notable positive trend is the realization by many entrepreneurs that such a market entry has to be well prepared. Far more than in the recent past, they recognize the importance of early identification of ‘hurdles‘ and ‘springboards‘ (the opposite of a hurdle, an accelerator) and the understanding of competitive environments, which leads invariably to a stronger value proposition and in turn to more successful customer acquisition.
The original text was published in De Tijd – and can be found here http://www.tijd.be/r/t/1/id/9484774.
All numbers quoted originate from FIT – Flanders Investment & Trade.