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TRENDING & SPENDING Continued from page 19 Trade Show Executive's Trending & Spending Forecast Fig. V: Sector Performance BEST PERFORMING SECTORS y Apparel y Security y Business Services MIXED PERFORMANCE y Communications y Government y Manufacturing y Automotive y Housing ECONOMIC INDICATORS Consumer Confidence dropped 2.4 points in June to 62.0, according to Te Conference Board. It was the fourth consecutive monthly decline. Core Inflation, which omits volatile food and energy prices, rose a minimal 0.2% in May over March. It was the third consecutive month with a negligi- ble increase. Corporate Earnings are expected to decline (0.5)% in the Second Quarter. Tis will be the third quarter to break the streak of eight consecutive quarters of double-digit growth. Gross Domestic Product grew at an annual rate of 1.5% from April to June, down significantly from 2% in the first three months of the year, according to the Department of Commerce. Housing Starts climbed nicely in May as builders broke ground on 3.2% more single-family homes than the previous month. It was the third straight increase. Industrial Production slipped (0.1)% in May (seasonally adjusted) aſter gaining 1% in April. Interest Rates (short term) remained near 0% in June, maintaining the ultra-low level set in December 2008. Job Growth was disappointing with only 69,000 net jobs created in May, well below the 252,000 average from December to February. Te Leading Economic Index, zigzagged back up 0.4% aſter a (0.1)% decline in April to 95.5 (2004 = 100). Manufacturing slowed in May as factories tempered production and pared inventories in response to global economic weakness. Te Institute for Supply Management's Factory Index fell to 53.5 aſter reaching a 10-month high of 54.8 in April. Retail Sales declined in May by the same percentage as April's (0.2)% adjusted drop. Continued dismal reports about the job market and the economy may spook shoppers into curbing their spending more. Te Unemployment Rate rose slightly to 8.2% in May. It was the first rise in the jobless rate in almost a year. y Medical y Retail y Food SECTORS UNDER PRESSURE y Construction y Home Furnishings y Technology y Hospitality y Transportation "I do not believe the crisis in Europe is causing this U.S. slowdown, although it is contributing to it by limiting our export markets," said Chow. Yet exports still grew slightly in the First Quarter. Chow noted that the U.S. recovery from the Great Re- cession has been led by business spending from the start. "Terefore, any slackening by companies will likewise impact the recovery, and in my opinion, is the main reason for the pause in activity," he said. More Signs of Weakness Nonresidential fixed investment — a measure of business spending on every- thing from factories to computers — fell in the First Quarter for the first time in more than two years. Also, spending on equipment and soſtware grew at its slowest pace since the recession ended in 2009. Restocking of inventories also slowed. Overall, investment climbed just 1.4%, about one fourth of its late 2011 pace, which helped restrain the econo- my's growth to 1.9%. A Fragile Business Psyche At the start of the year, CEOs' outlook for spending and hiring improved sharply from the Fourth Quarter, according to a Business Roundtable survey. However, business investment growth slumped in- stead and there are signs it also weakened early in the Second Quarter. Why is this happening? Chow believes business ex- ecutives are looking ahead and are seeing several daunting issues that may signifi- cantly affect their bottom line: y Te so-called fiscal cliff. y Accelerating business regulations. y Te recession and financial crisis in Europe. y Te dramatic curbing of growth in China. y Te presidential election in November. Uncertainty over these issues is ham- pering business spending and invest- ment. "My sense is, business people have been through a lot, and their collective psyche is very fragile," says Mark Zandi, chief economist of Moody's Analytics. "If anything goes off script, they stop hiring and investing." An indication of corporate frugality comes from the Global Business Travel Association which 20 July 2012 | Trade Show Executive estimates American businesses will take fewer trips in 2012 and 2013. A recent report by Business Travel News found that 70% of 168 travel buyers surveyed from December 2011 to February 2012 had reviewed or tightened their expense policies. Tree in five of businesses sur- veyed had introduced an online expense reimbursement system and more than half of the respondents had increased expense report auditing. A Fiscal Cliff One of the issues which needs clarity is the "fiscal cliff" which has recently made news headlines, Chow said. It is a collec- tion of tax increases and spending cuts set to begin January 1, 2013. According to Bank of America/Merrill Lynch analysts, it is worth $720 billion or roughly 4.6% of the U.S. Gross Domestic Product. Tey include the expiration of the Bush tax cuts and the temporary payroll-tax holiday on social security, automatic spending cuts agreed to in the last budget deal to increase the debt ceiling, tax increases to fund the new health care law, and more. Tax policy analysts call it "taxmageddon," Chow said. My sense is, business people have been through a lot, and their collective psyche is very fragile. If anything goes off script, they stop hiring and investing. Mark Zandi, CHIEF ECONOMIST FOR MOODY'S ANALYTICS Te Congressional Budget Office (CBO) predicts that stepping off the fiscal cliff would slash two million jobs and tip the economy back into recession. Te huge tax increase will impact everyone including those at the lowest tax brackets. If the full fiscal drag is inflicted on the economy, it would clearly be harmful to GDP growth. Negative or virtually flat Continued on page 23 SPONSORED BY