Small Business Economic Update

By Christina Suter on Aug 09, 2014 at 10:13 AM in Business Issues
Small Business Economic Update

When looking at the economic state of the nation, it is essential to look at the gross domestic product. For the United States, the gross domestic product tells us how much the US produces and sells. How much we sell returns in how much we buy. If the money rotates through the system at an increased rate, money is flowing, cash is available, and people can buy. If its constricting, there's less money flowing and people are less likely to buy our products. The gross domestic product (gdp) is important because it sets the tone as to whether we experience money as growing or stagnant and lacking. Since 2009 the gdp has been increasing from between 2-5%. Last quarter people were concerned and scared because the gdp went from 4% to -2%. When that happens, people don’t pay for anything and life gets tough.

As much as we look at the stock market as something for big business and biblically traded businesses, the stock market does affect small business owners. It has to do with the general flow of wealth in the economy and in the world. The stock market is international, people in other countries invest in the US stock market. Since the 2007-2008 dip, it has been growing and just since 2009 it has increased by 140%. When big business is flowing, money moves through the economy and that helps us, small business owners indirectly.

Consumer inflation- similar to the core median inflation, consumer inflation is fluctuating and averaging below 2%. Core inflation takes out the costs of food and gas, so they don’t account for everything that affects you as a consumer. That's where shadow statistics comes in; shadow statistics inflation is between 4-6%. That means prices of goods are increasing and that's good news for you because people now think your prices seem reasonable and that should bring you more business. But it can be bad news because it means that it now costs you more money to make your goods, but you are still getting ahead of the game. There has also been intentional quantitative easing. Quantitative easing has been keeping the treasury rate really low, pretty much flat. That means we’ve been pouring money into the economy; the US government has been borrowing money from us and the international economy and pouring it into the economy to stabilize it due to the gdp being so low. Now that it's been recovering for 2-3 years, they're easing back so that the natural growth can go forward without the federal reserve pouring money in. It's actually coming to a close; the deficit went to 1.4 trillion at its highest and presently, it is at less than 800 billion. We’ve been paying it down and we’re not growing the deficit, we’re reducing it, which is producing greater growth and stability.

The unemployment and underemployment rate have gone also down which helps. We’re creating more jobs, which creates more money and employers are employing again. The average income is going up and income increase means a greater sense of confidence in the market. There are pieces in the nation still trying to recover and the climb is slow, but it is happening.