Global economic outlook appears brighter as risks recede
Though 2016 brought much that was unexpected to the global economic and political landscape, many of the risks that were looming over the near-term outlook have receded.
After years of economic crises and recessions, the global economy in 2017 seems finally to be firing on all cylinders. It took a long time to get to this point, but this year—for the first time since 2007—all 35 countries in the Organization for Economic Co-operation and Development (OECD) are growing. What's more, nearly three-quarters of them are seeing their growth accelerate.
The BRICs (Brazil, Russia, India, and China) are looking sturdier than in the past: Brazil exited a two-year recession in the first quarter, and Russia, which had seen its gross domestic product (GDP) decline in year-on-year terms for seven consecutive quarters, pushed GDP up past its year-ago level in the fourth quarter of 2016. (See Figure 1.) Meanwhile, China, which has been on a decelerating path, is seeing a modest growth spurt in 2017, with growth likely to outpace that of the previous year for the first time in seven years. The long-troubled European Union is on solid economic footing, with an unemployment rate in June at the lowest level since February 2009. With all of these positive forces in play, the global economic growth rate this year is likely to be the fastest it has been since 2011.
Policy risks recede
Economic stability is never the only story, however, and for parts of 2016, it was looking like political developments were poised to spill over into the economic punch bowl. In June of 2016, voters in the United Kingdom shocked the world when a majority unexpectedly voted in favor of leaving the European Union (a decision popularly known as Brexit). This was followed by the U.S. election of Donald Trump in November 2016. Both moments represented the victory of protectionist, anti-immigration, anti-globalist movements, leading some to wonder whether more countries would soon follow—and whether the EU's very existence was under threat. Such outcomes normally dampen growth; notwithstanding their effect on the economies of particular countries, protectionist trade regimes and other trade barriers are commonly understood to inhibit global economic activity.
But in the wave of elections that followed, nationalism seemed to lose momentum. That December, in Austria, Alexander Van der Bellen, a pro-European liberal, was elected president in a convincing victory over the right-wing candidate Norbert Hofer. In March 2017, the Dutch parliamentary election, viewed as a referendum on the far-right populism championed by firebrand Geert Wilders, resulted in the continued majority of center-right Prime Minister Mark Rutte's party. In May, French centrist Emmanuel Macron, at the head of a party (En Marche) founded only one year before, defeated right-wing nationalist Marine Le Pen in a presidential run-off election, and En Marche followed this up in June parliamentary elections by securing a substantial majority of seats. A June snap election called by U.K. Prime Minister Theresa May, far from strengthening her Conservative Party's position, resulted in the loss of its majority, an outcome that could lead to a "softer" Brexit. In the same election, the U.K. Independence Party—whose major issue was championing the U.K.'s withdrawal from the EU—won zero seats. And in September, Angela Merkel won four more years as Germany's chancellor, although the insurgent right-wing AfD party showed new strength. Financial markets generally responded better to victories of pro-trade candidates; for example, when Macron was elected, the euro strengthened, while news of Brexit hit the value of the pound sterling hard.
Of course, the story of political risks to economic growth will never truly end. In Spain, a referendum on Catalonian independence was held in September, but its legitimacy was disputed by the Spanish government and international observers. The result was overwhelmingly pro-independence but was complicated by the nonparticipation of many voters who opposed independence. The ongoing disputes related to Catalonian independence—and the possibility that it would actually occur—are a significant risk to Spain's economic recovery. Looking forward, Italy's next general parliamentary election is slated to happen by May 2018. The degree of success of the anti-establishment, euroskeptic "five-star" movement will be seen as a measure of the public's appetite for a referendum on EU membership, a vote the movement has pledged to hold. And even as Brazil emerges from economic recession, it has landed back in political instability thanks to a corruption scandal. The saga, which has been ongoing for years, played a role in the country's recession and resulted in the impeachment and ouster of former President Dilma Rousseff. Her successor, Michel Temer, has been implicated in criminal charges. As the drama continues to play out, Brazil's recovery remains on shaky ground.
Engines of global growth
A look at the other BRICS, India and China, shows that China's GDP per capita of US$8,137 in 2015 stands in stark contrast to India's tally of US$1,629, despite the two countries' similar populations. (India is projected to surpass China in population in 2022.)
India and China have the two largest populations in the world. That, combined with brisk growth rates averaging 7.2 percent and 9.0 percent, respectively, over the last 10 years, has made them collectively responsible for more than 40 percent of the world's GDP growth over the past decade. Although each faces its own manner of challenges, their economic development has been key in reducing the global poverty rate (proportion of people who live on US$1.90 or less per day) from 35 percent in 1990 to below 11 percent today.
But in China, economic fundamentals are weak, and the country's economic structure includes major imbalances. In particular, consumer demand is suppressed thanks to a high propensity to save; China's financial system is relatively undeveloped and does not make it easy for private enterprises to borrow, resulting in a volatile "shadow" lending system; and Chinese policymakers are still trying to gradually unwind a real estate bubble without causing a "hard landing." China's growth has slowed for each of the last six years, in spite of repeated stimulus measures by the government, and we expect this trend to generally continue for the foreseeable future. But slowing growth in China's case is a symptom of "convergence," an economic concept that refers to countries that are behind in development growing at a faster pace than developed economies. Thanks to its earlier rapid growth, China is beginning the natural process of settling into the more sedate growth pace of a developed economy.
India, meanwhile, suffers from major underdevelopment of infrastructure. Reform efforts have produced disruption; in particular, the November 2016 demonetization, in which Prime Minister Narendra Modi's government suddenly recalled two major denominations of the rupee in a bid to impede tax evasion and counterfeiting, shocked consumer spending amid cash shortages. But this year has seen some promising signs on the reform front. Following more than a decade of negotiation, a unified goods and services tax came into effect in July 2017, replacing a slate of other taxes. The new rule eliminates instances of double taxation and slashes logistical and bureaucratic costs of compliance. If successful, the tax has the potential to improve India's competitiveness and accelerate development. And even though the demonetization measure produced disruption and lowered consumer spending in the short term, a subsequent landslide victory in 2017 for the ruling Bharatiya Janata Party (BJP) in Uttar Pradesh—India's biggest state—puts fresh wind in the sails of BJP's reform agenda.
While risks to the global economic growth outlook still exist, threats that seemed major just one year ago—including trade wars, instability in the EU, and a sharp Chinese economic contraction—now rate as outside possibilities. Barring war or panic, the stage is set for a good few years of broad-based international economic growth.
Supply Chain Xchange Executive Editor Susan Lacefield moderates a panel discussion with Supply Chain Xchange's Outstanding Women in Supply Chain Award Winners (from left to right) Annette Danek-Akey, Sherry Harriman, Leslie O'Regan, and Ammie McAsey.
Supply Chain Xchange recognized four women who have made significant contributions to the supply chain management profession today with its second annual Outstanding Women in Supply Chain Award. The award winners include Annette Danek-Akey, Chief Supply Chain Officer at Barnes & Noble; Sherry Harriman, Senior Vice President of Logistics and Supply Chain for Academy Sports + Outdoors; Leslie O’Regan, Director of Product Management for DC Systems & 3PLs at American Eagle Outfitters; and Ammie McAsey, Senior Vice President of Customer Distribution Experience for McKesson’s U.S. Pharmaceutical division.
Throughout their careers, these four supply chain executive have demonstrated strategic thinking, innovative problem solving, and effective leadership as well as a commitment to giving back to the profession.
The awards were presented at the Council of Supply Chain Management Professionals (CSCMP) annual EDGE Conference in Nashville, Tenn. In addition to the awards presentation, the leaders discussed their leadership philosophies and career path during a panel discussion at the EDGE conference.
The surge of “nearshoring” supply chains from China to Mexico offers obvious benefits in cost, geography, and shipping time, as long as U.S. companies are realistic about smoothing out the challenges of the burgeoning trend, according to a panel today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
Those challenges span a list including: developing infrastructure, weak security, manual processes, and shifting regulations, speakers said in a session titled “Nearshoring: Transforming Surface Transportation in the U.S.”
For example, a recent Mexican government rail expansion added lines to tourist destinations in Cancun instead of freight capacity in the Southwest, said panelist Edward Habe, Vice President of Mexico Sales, for Averitt. Truckload cargo inspections may rely on a single person looking at paper filings on the border, instead of a 24/7 online system, said Bob McCloskey, Director for Logistics and Distribution at Clarios, LLC. And business partners inside Mexico often have undisclosed tier-two, tier-three, and tier-four relationships that are difficult to track from the U.S., said Beth Kussatz, Manager of Northern American Network Design & Implementation, Deere & Co.
Still, dedicated companies can work with Mexican authorities, regulators, and providers to overcome those bottlenecks with clever solutions, the panelists agreed. “Don’t be afraid,” Habe said. “It just makes sense in today’s world, the local regionalization of manufacturing. It’s in our interest that this works.”
A quick reaction in the first 24 hours is critical for keeping your business running after a cyberattack, according to Estes Express Lines, the less than truckload (LTL) carrier whose computer systems were struck by hackers in October, 2023.
Immediately after discovering the breach, the company cut off their internet, called in a third-party information technology (IT) support team, and then used their only remaining tools—employees’ personal email and phone contacts—to start reaching out to their shipper clients. The message on Day One: even though the company was reduced to running the business with paper and pencil instead of computers, they were still picking up loads on time with trucks.
“Customers never want to hear bad news, but they really don’t want to hear bad news from someone other than you,” the company’s president and COO, Webb Estes, said in a session today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
After five or six painful days, Estes transitioned from paper back to computers. But they continued sending clients daily video updates from their president, and putting their chief information officer on conference calls to answer specific questions.
Although lawyers had advised them not to be so open, the strategy worked. It took 19 days to get all computer systems running again, but at the end of the first month they had returned to 85% of their original client list, and now have 99% back, Estes said in the session called “Hackers are Always Probing: Cybersecurity Recovery and Prevention Lessons Learned.”
As the final hours tick away before a potential longshoreman’s strike begins at midnight on the U.S. East and Gulf coasts, experts say the ripples of that move could roll across the entire U.S. supply chains for weeks.
While some of the nation’s largest retailers were able to pull their imports forward in recent weeks to soften the blow, “the average supply chain is ill-prepared for this,” Tom Nightingale, the former CEO of AFS Logistics, said in a panel discussion today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
Despite that grim prognosis, a strike seems virtually unavoidable, CSCMP President & CEO Mark Baxa said from the stage. At latest report, the White House had declined to force the feuding parties back into arbitration through its executive power, and a voluntary last-minute session had failed to unite the International Longshoremen’s Association (ILA)’s 45,000 union members with the United States Maritime Alliance that manages the 36 ports covered under their expiring contract.
The ultimate impact of a resulting strike will depend largely on how long it lasts, the panelists said. With a massive flow of 140,000 twenty foot equivalent units (TEUs) of shipping containers moving through the two coasts each week, each day of a strike will require 7 to 10 days of recovery for most types of goods, Nightingale said.
Shippers are desperately seeking coping mechanisms, but at this point the damage will add up fast, whether a strike lasts for an optimistic “option A” of just 48 to 72 hours, a pessimistic “Option B” of 7 to 10 days, or even longer, agreed Jon Monroe, president of Jon Monroe Consulting.
The first full day of CSCMP’s EDGE 2024 conference ended with the telling of a great American story.
Author and entrepreneur Fawn Weaver explained how she stumbled across the little-known story of Nathan “Nearest” Green and, in deciding to tell that story, launched the fastest-growing and most award-winning whiskey brand of the past five years—and how she also became the first African American woman to lead a major spirits company.
Weaver is CEO of Uncle Nearest Premium Whiskey, a company she founded in 2016 and that is part of her larger private investment business, Grant Sidney, Inc. Weaver told the story of Uncle Nearest—as Nathan Green was known in his hometown of Lynchburg, Tenn.—to Agile Business Media & Events Chairman Mitch MacDonald, in a keynote interview Monday afternoon.
As it turns out, Green—who was born into slavery and freed after the Civil War—was the first master distiller for the Jack Daniel’s Whiskey brand. His story was well-known among the local descendants of both Daniel and Green, but a mystery in the larger world of bourbon and a missing piece of American history and culture. Through extensive research and interviews with descendants of the Daniel and Green families, Weaver discovered what she describes as a positive American story.
“I believed it was a story of love, honor, and respect,” she told MacDonald during the interview. “I believed it was a great American story.”
Weaver told the story in her best-selling book, Love & Whiskey: The Remarkable True Story of Jack Daniel, His Master Distiller Nearest Green, and the Improbable Rise of Uncle Nearest, and has channeled it into an even larger story with the founding of the brand. Today, Uncle Nearest Premium Whiskey is made at a 323-acre distillery in Shelbyville, Tenn.—the first distillery in U.S. history to commemorate an African American and the only major distillery in the world owned and operated by a Black person.
Weaver and MacDonald's wide-ranging discussion covered the barriers Weaver encountered in bringing the brand to life, her vision for where it’s headed, and her take on the supply chain—which she said she views as both a necessary cost of doing business and an opportunity.
“[It’s] an opportunity if you can move quickly,” she said, emphasizing a recent project to fast-track a new Uncle Nearest product in which collaborating with the company’s supply chain partners was vital.
Uncle Nearest Premium Whiskey has earned more than 600 awards, including “World’s Best” by Whisky Magazine two years in a row, the “Double Gold” by San Francisco World Spirits Competition, and Wine Enthusiast’s “Spirit Brand of the Year.”
CSCMP’s EDGE 2024 runs through Wednesday, October 2, at the Gaylord Opryland Hotel & Convention Center in Nashville.