With the second quarter results coming in and with the increase in consumer spending along with the housing sector picking up momentum, U.S economic growth is likely see some acceleration and offset the drag from the energy and the trading sectors. A steady forward momentum in economic growth could see the Federal Reserve hike up the interest rates later this year.
 
The U.S government is also expected to report an increase in its Gross Domestic Product (GDP) by 2.6%. However some elements of doubts have crept in since the government has adjusted some of the components that make up the GDP, which economists said left residual seasonality in the data. This effectively means that the earlier report of the GDP shrinking by 0.2% could be revised because of new data streams.
 
"We expect a decent bounce back, which will suggest that the economy's struggles at the start of the year were temporary. GDP growth north of 2.5 percent is sufficient to reduce the slack in the broader economy," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
 
The Federal Reserve has described the economy as expanding "moderately". It sees the labor market as improving and as for the housing sector it says it shown "additional" improvements. The Federal Reserve has left all option on the table for a possible hike in interest rates in September which would be the first rise since 2006.
 
 
A BOOST IN CONSUMER CONFIDENCE
Cheaper gas prices since late 2014 are likely to have fed increased consumer spending also with the labor market becoming stronger, consumers have had the financial strength to loosen their purse strings. As a result, consumer spending which accounts roughly for more than two-thirds of economic activity, has shot up from 2.1 in the first quarter to 2.9 in the second.
 
"The upshift in growth momentum should be sustained during the second half of the year. This will provide the necessary cover for the Fed to raise rates later this year, though the pace of tightening will be 'gradual,'" said Millan Mulraine, deputy chief economist at TD Securities, New York.
 
 
Further, the housing market which had nearly collapsed earlier, has now greatly recovered. Its recovery and strengthening has expectedly supported economy growth in the second quarter. Naturally, government spending has also helped.
 
The energy sector however, has acted as a drag on the economy. Having spent billions, the fall of crude oil prices which have plunged by more than 60%, compared to prices from last year, have negatively affected companies such as Halliburton and Schlumberger. However, as per U.S energy data, 21 oil rigs have been installed which could be early signs of recovery in the energy sector.
 
Schlumberger reported last week that it believed that its total North American rig count is likely to bottom out and that may open up a slow rise in oil drilling and completion activities of the same, during the second half of this year.
 
 
Another component that is acting as a hindrance to growth is the strength of the dollar which is continuing to hobble exports in the second quarter. At the same time it is favoring the imports of goods in order to meet consumer demand. This is likely to widen trade deficits and act as a hindrance to the growth of the GDP.
 
Source: Reuters.com

Thestrategist.media, Chicago – 18 May 2015 – In spite of positive sales projections, upbeat consumer confidence levels and lot other optimistic sales growth indications, retailers are still unsure about strategic investments in the new U.S retail marketplace. The largest U.S retailers are still unsure about the growth chances of the market even though market performances have been stable and steadily growing year after year.
 
Retailers are now eyeing growth options not just in opening new stores but rather developing brand image in more ways than one. These days with physical stores, a solid online presence is also essential to provide customers with convenience and easy access to products.
 
2015 BDO Retail Risk Factor Report has collected and analyzed months of data related to vendor and retailers concerns over the retail industry from concerns over shipping and imports to supplier and vendor risks. Retailers have decided to look away from China over raising cost issues and decided to focus on North America as the most wanted sourcing option according to BDO’s 2015 Retail Compass Survey of CFOs.
 
Investment cannot just be focused on physical stores anymore, that form of investment is pretty risky. With customers having migrated online for majority of the current generation, capital investments more so than less need to be focused on online sales channels, supply chain networks and system implementations.
 

 
Economic Risk Concerns Headed By Interest rates
Second year in a row, interest rates clocked as the most frequently cited economic concern at 88% over fuel prices that plagued 83%. With unemployment now in check, retailers and consumers are all looking towards the Federal Reserve to see if rates would be lowered.
 
Concerns over Currency Rate
The U.S dollar’s value has risen in the past year but still currency rate risks are bothering retailers in a percentage of 82%. 
 
Cyber security Risks Now Omnipresent
 With cyber security such a common issue these days, virtually all retailers at 99% have cited IT concerns as a top risk in terms of business.
 
Market Concerns Still High overlabor and Workforce Availabilities
 Labor risks worry retailers with a full 96% of them citing that as a concern. Faced with stress of workforce problems, stores are struggling to find skilled workers.
 
About the Consumer Business Practice at BDO USA, LLP
BDO is a seasoned business advisor to consumer business companies for over 100 years. The firm offers assistance to a wide variety of consumer and retail business clients, ranging from small entrepreneurial businesses to multinational conglomerates featured on Forbes’ lists, on points of tax calculations, maintaining accounts or ledgers and other financial issues.
 
About BDO
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References:
https://www.bdo.com/news/2015-may/retailers-top-risks-signal-questions