As of now, the state of the economy in quarter 3 is looking worse than how it was looking it would be in quarter 2. This is not a good sign for the future and reflects much of what occurred in 2001 when the economy was getting predicted to grow at a certain rate and it was consistently. I believe that this means we are headed toward a recession most likely occurring in 2023. Forecasters in the 2022 survey stated that “GDP will grow at an annual rate of 1.4%” “Down from the prediction of 2.5% in the last survey”. The decline in growth predictions shows that the overall economy is declining even faster than the experts predict. I believe this means that our company must start to adjust for a recession so that they aren’t caught off guard by the sudden change in the economy. Additionally, other data that point to a recession in the near future is when analyzing data on the treasury yield spread between the 10-year note and the 3-month bill. In the past, a trend is seen where prior to a recession growth drops to negative approximately 1-1.5 years in advance. This can be seen during the 2008 recession where in 2007-02-28 treasury yield was growing at a rate of -.6 a year. Later the recession officially started on 2008-02-29 showing about a year later the effects were seen. This early drop in treasury yield can be seen in 2022 with the rate dropping to a current low of .2. Following the trend seen in throughout past recessions, this can be seen as a clear indicator that a recession is near. I believe given all this data a recession is near and the Bank of New Hampshire must start preparing immediately. My recommendation is that the Bank of New Hampshire starts following its contingency plan. I would also start to build up loss reserves, conducts expense reviews, tries to maximize yield on assets, and looks to sell less profitable assets. This Bank of New Hampshire will be prepared for the recession and will have its best shot at surviving it.
The author writes on page 31:
"At the beginning of 2001, the economy was not in recession. The fourth quarter of 2000 data had not been released but would, in time, show that the economy had grown by 2.2 percent in twelve months. Forecasters were nervous, however. The consensus forecast published by the Federal Reserve Bank of Philadelphia in February 2001 predicted a mere 0.8 percent growth in the first quarter. Also of significance, the forecasters had revised their numbers down from 3.3. percent growth in the prior survey three months earlier. That should have been a tip-off that the economy needed watching... However, executives who saw the lowered forecast in early 2001 and thereafter watched the economy closely were in a far superior position to those managers who chugged forward as if nothing were amiss."It shows how a business manager should use macroeconomic forecasts. Go to the Federal Reserve Bank of Philadelphia and open the latest forecast report by clicking this link to Survey of Professional Forecasters. What is your reading? Is it time to watch the economy closely for an incoming downturn? Is the Philadelphia Fed’s forecast consistent with the six economic indicators we analyzed in the real-world applications three assignment?
Write your answer below this line. When writing, keep the following in mind.
| Question | Response from the company |
|---|---|
Sales can swing wildly. If the company’s too slow in responding to a sudden drop in sales, it could go bankrupt. If it is too slow in responding to a large upswing, it could lose its market share. It could even develop a reputation of an unreliable vendor. Please, discuss your early warning system, if you have one. |
The level of our car inventories which we watch closely is a great early warning indicator. In the car business, we get to see what our competitors are selling daily so we have perspective on not just what we are selling, but how our competitors are fairing as well. Certainly, we pay close attention to what our manufacturing partners are telling us as well as the National Auto Dealers Association, our industry trade group. |
| Question | Response from the company |
|---|---|
Sales can swing wildly. If the company’s too slow in responding to a sudden drop in sales, it could go bankrupt. If it is too slow in responding to a large upswing, it could lose its market share. It could even develop a reputation of an unreliable vendor. Please, discuss your early warning system, if you have one. |
The bank builds up loss reserves, conducts expense reviews, tries to maximize yield on assets, looks to sell less profitable assets, e.g. low yielding loans. The bank also conducts various annual stress tests and scenario analyses to identify potential problems that could arise during an adverse economic event. Corrective action is taken to mitigate these risks if the exposure is outside of acceptable ranges. |
| Question | Response from the company |
|---|---|
Sales can swing wildly. If the company’s too slow in responding to a sudden drop in sales, it could go bankrupt. If it is too slow in responding to a large upswing, it could lose its market share. It could even develop a reputation of an unreliable vendor. Please, discuss your early warning system, if you have one. |
Our staffing is very light, and we utilize outsourcing when we are busy. In a downturn we can return to in house production. |