Profit Confidential Says Global Economy in Sharp Slowdown – U.S. Companies’ Earnings at Risk

Profit Confidential weighs in on the global economy and warns that U.S. companies’ earnings are at risk.

Profit Confidential (www.ProfitConfidential.com) an e-letter of Lombardi Publishing Corporation, a 29-year-old consumer publisher that has served over one million customers in 141 countries, warns the four biggest global economies are experiencing declining growth; jeopardizing the earnings of U.S. companies.

Major economic hubs in the global economy are struggling to show growth. Germany, the fourth-largest economy, reported second-quarter growth of just 0.3% after experiencing similar growth in the first quarter. In the fourth quarter of 2014, Germany’s economy expanded at 0.7%. (Source: reuters.com, article, “German economy likely grew by around 0.3 percent in second-quarter: finance ministry,” July 19, 215; http://www.reuters.com/article/2015/07/19/us-germany-economy-idUSKCN0PT0RA20150719)

“Japan, the third-largest economy has been in and out of recession for years and China, the world’s second-largest economy saw its second-quarter GDP grow at the slowest pace since the global financial crisis of 2009—and its stock market is in freefall,” says economist and lead contributor Michael Lombardi. “Here at home, the U.S., the world’s largest economy, experienced negative GDP growth in the first quarter of this year. So you have the four largest global economies seeing declining growth here in mid-2015.”

Lombardi explains that as the major economies struggle, smaller countries will follow them. For example, as China’s economy is slowing, Australia, a major China trading partner is seeing its economy suffer. Over the last number of years, U.S. companies have increased their exposure to the global economy. The U.S. dollar was declining and other currencies were going higher. The conversion of foreign currency sales into U.S. dollars made the revenue and earnings of American companies look strong.

In 2014, according to S&P Dow Jones Indices, 47.82% of all sales on the S&P 500 came from outside the U.S. economy. This was the highest on record since 2009. Today however, the U.S. dollar is rising in value against other major global currencies, putting pressure on the revenue and earnings of the S&P 500 companies that do sales abroad. (Source: spindices.com, article, “S&P 500® 2014: Global Sales,” July 2015; http://www.spindices.com/documents/research/research-sp-500-2014-global-sales.pdf)

“Aside from the U.S. economy slowing down, you have half of the S&P 500 companies doing business outside the U.S. and facing currency pressure on their revenues,” Lombardi concludes. “It would be foolish to assume that this year will see the stock market providing the same returns as it did in 2013 and 2014, as the most basic factors that drive the stock market higher—corporate earnings—are in jeopardy.”

Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.lombardipublishing.com/customer-service.html

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Release ID: 88113