Does the Global Economy Matter to Your Small Business?

By December 9, 2015Uncategorized

Your small business may operate out of a cozy corner store on Main Street, a nondescript office space in a towering high rise or from a computer on a card table in your spare room. It may feel as if your sphere is small, your market is medium, or maybe the world is just getting to know you. So when institutions like Morgan Stanley start making predictions about the global economy in 2015, should you be paying attention? Does the global economy affect your business?

The answer is yes.

In a recent presentation of Morgan Stanley's annual forecast, economists predicted for 2015 to be "bumpy, below par and brittle." While the U.S. will see relatively strong growth, Europe, Japan and other countries will still encounter weakness, causing an "out of synch" global expansion. They are tossing around words that business owners understand, like inflation, the expansion of the money supply, or more recently generalized as rising prices. Deflation, falling prices, or as many economists say economic poison that causes consumers to delay making purchases.


What is Lowflation?

A relatively new term on the economic scene is "lowflation," a situation in which prices are rising, but not fast enough to boost the economy the way inflation does. In European countries struggling with deflation, lowflation is responsible for higher interest rates but less relative price adjustment. Economies are unsettled in a state of lowflation.


Why does it Matter to You?

When large, developed nations' creditworthiness–or lack thereof–is questionable, small businesses feel it. Governments have to pay more to borrow more and the trickledown effect is felt in the lending arena, where banks tighten their lending policies. Everything from manufacturing and imports feels the slowdown. Resources from abroad are tighter, strings tighten on lending opportunities. Bottom line is without a reasonable opportunity to borrow, to keep cash flow moving and invest in the future of your business, your business can feel the swing of the global economy.

Based on predictions by economists at Morgan Stanley, if you own a small business, be conservative as the new year progresses, with an eye on the global market for ups and downs.


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