Economy is Strong But Risks are Plenty
Oceanside, CA - Last month, we warned our readers of the potential economic damage that a new terrorist attack in the U.S. would wreak on the exhibition industry. Now, a new concern has landed on the shores of our country — Ebola — which faces a lot of concern, confusion and misinformation. Terrorism, Ebola and other threats are festering amidst the geopolitical turmoil raging around the world.
Meanwhile, shuffled to the background, are reports on the solid U.S. economy. The U.S. appears to be one of the few major economies still trending upward, while Europe, China, Japan, Latin America and Russia are all slowing down, which Frank Chow, chief economist for Trade Show Executive, says is a danger signal for the U.S. in the long-term.
At the time of this writing, 14 cases of Ebola have been treated outside of the West African region where it originated. Six were in the United States. Tom Frieden, director of the Centers for Disease Control and Prevention (CDC), says the virus “poses no significant threat” to the U.S. health system. Other health officials insist the disease has little chance of spiraling out of control like the crisis in West Africa where the virus could potentially infect 1.4 million people in Liberia and Sierra Leone by the end of January, according to a statistical forecast by the U.S. Centers for Disease Control and Prevention (CDC). As a precaution, the U.S. began Ebola screenings at five major airports. Customs officials estimate that each day, 150 people travel from Liberia, Sierra Leone or Guinea to the U.S. through JFK airport.
In other developments, 30 Ebola experts who traveled recently to West Africa were banned from attending the Annual Meeting of the American Society of Tropical Medicine & Hygiene in New Orleans, a medical meeting about infectious diseases. The Louisiana Department of Health & Hospitals and the Governor’s Office of Homeland Security & Emergency Preparedness implemented a travel advisory, stating that anyone who travels to Louisiana within three weeks of visiting West Africa will be confined to their hotel rooms.
Other health officials point out that air-borne respiratory viruses such as the flu are far more dangerous, killing about 49,000 people each year. The CDC reports that in September and part of August, at least 538 people in 43 states and the District of Columbia have become ill with EV-D68, a type of enterovirus that had been relatively dormant in the U.S. the past 30 years. Most of the ill are children and some have developed limb paralysis. At least five children infected with EV-D68 died in September. The CDC has no answer to why the virus has ticked up or what is its origin.
Yet the onslaught of Ebola has fueled anxiety worldwide, given that (1) The virus has such a high fatality rate, (2) There is no vaccine that the FDA or the CDC considers "safe," and (3) The track record of U.S. hospitals in controlling infections in general suggests a lot of them aren't prepared to handle Ebola cases. According to data from the CDC, roughly 1 in 25 patients gets an infection when treated in a U.S. hospital, which equates to more than 700,000 hospital-associated illnesses each year. There is no margin for error with Ebola patients.
What We Have Learned from SARS
The most recent airborne pandemic was SARS, which originated in Asia. The pandemic struck more than 8,000 people in 32 countries and over 700 people died. The SARS outbreak had a significant impact on the exhibition industry as travel was crippled worldwide. Trade shows, conferences, and meetings were canceled in Asia and Canada. In the U.S., show attendance by international travelers plummeted those from Asia by as much as 90%. Moreover, investment in countries severely hit by SARS was disrupted. Fortunately, SARS was completely contained worldwide in about six months and there has not been another case since.
Global Growth Downshifting
“With global growth slowing, containment of these diseases early is crucial before panic ensues, for the sake of human lives and avoidance of massive disruption in business and travel, including trade shows,” said Chow. The outbreaks are occurring when conflicts are escalating in Iraq, Syria, Ukraine, and the global economy appears fragile:
- The IMF has lowered its forecast of global economic growth for 2014 and 2015, warning the Eurozone may slip back into recession in the next six months.
- German exports, Eurozone’s largest economy, fell (5.8)% in August, the worst decline in almost six years.
- Italy is entering its third year of recession and France is on the verge.
- Japan, which has the world's third largest economy, is struggling after Second Quarter GDP shrank (7.1)%.
- China’s growth momentum is slowing as it continues restructuring its financial sector and other market-oriented reforms.
- Russia’s economy is almost flat-lining due to a growing sanctions battle over Ukraine that is prompting investors to pull money from the country.
- Latin America’s prospects for 2014 remained under pressure in September as the LatinFocus Consensus Forecast panelists cut growth from 1.6% to 1.3%, marking the 17th consecutive month of lower projections.
Chow noted that the European Central Bank announced a new monetary stimulus plan in September and kept the door open for additional measures aimed at revitalizing the economy. He said the IMF called on European officials to do more to fight the risk of falling prices and high unemployment smothering growth. “It appears the U.S and Europe will be taking divergent monetary policy paths,” Chow said. “The Federal Reserve (Fed) ended its Quantitative Easing program in October while the European Central Bank is starting one.”
Steady Economic Growth on the Home Front
Meanwhile, the U.S. economy keeps chugging along with steady growth, Chow pointed out. Nonfarm payrolls rose by 248,000 in September, and August's figure was revised to 180,000 from 142,000. The unemployment rate fell to 5.9%, beating the 6.1% consensus, partially because of a decline in the labor force participation rate. Second Quarter GDP was revised up again to 4.6% from the original 4%. The revision was driven mainly by fixed business investments with 9.7% growth and exports.
According to a new Brookings Institution report, “The world economy is now being powered mostly by the U.S. growth engine, a situation that is untenable for a sustained and durable global economic recovery.” However, the report notes many problems still persist in the U.S. such as declining labor force participation rate, high part-time employment, and stagnant wage growth.
Looking to the Future
Chow said the Fed is set to increase interest rates next year if the economy continues to improve. However, rising uncertainty from potential pandemic diseases and numerous global conflicts may eventually stall the U.S. recovery, Chow warns. “However, one silver lining is plummeting energy and gas prices,” he said. “The travel and trade show industries, along with consumers and manufacturers, greatly benefit from falling energy costs, possibly setting up a stronger outlook for next year.”
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