Global Economy

About 2 weeks ago, I was an instructor teaching a class on coaxial cable at the International Wire and Cable Symposium in Charlotte, NC. During the symposium top executives from 5 companies, including CommScope, gave their input on the state of their business, the US economy, and the global economy.

The underlying view from the 4 companies that are predominantly US businesses was that the USA and Europe are at half time. While 2009 was not as bad as anticipated it is believed that 2010 will have revenue flat to down slightly with a recovery in 2011.

The company with a global view, CommScope, painted a different picture with overall growth being in the high single digits for 2010. While 2009 was a year to be efficient, 2010 and beyond offer a period for growth. Global wireless demand is growing rapidly with 4.3 billion people using a wireless device and that Africa has more cell phone users than the USA. Africa is a high growth area for Wireless communication with the current focus being a voice call and in the future capability will be added like internet access. WWEE continues in developing countries.

Their overall message was that the US and Europe are flat for 1 more year while globally, especially in developing countries, the stimulus efforts were more effective and things are growing. An organization called the OECD provides information on the global economy. This week, they increased their forecast economic growth projection for 2010 from 0.7% to 1.6% and project a growth of about 3% in 2011. A 3% growth rate would be a relatively normal number.

For the US economy it appears to be a mixed bag. The index of leading economic indicators showed a 0.3% increase for October such that in a 1 year period this index has grown by about 4%. In fact the last time this happened was in 1982 before the stock market made a huge run. While this gives a very positive picture other indicators like the index for coincident and lagging indicators are down about 5% year over year.

It appears that the US economy has some parts that are starting to move. It also appears that given the number of shoppers at stores that this Christmas season will probably top expectations as people feel better about the future.

Commodity prices that have increased during 2009 also indicate that the global economy is growing. These prices will maintain current levels as a foundation and will most likely continue to rise because of higher demand.

What is the bottom line? Owning a mutual fund that invests in developing countries is a good thing to do. The US economy is recovering so relax about the future.