WCA March 2014

From the Americas

That is what happened in 2013, observed Mr Kennedy. At the end of November the South African Rand had lost 17 per cent year-to-date against the dollar, while the Brazilian Real had dropped 11 per cent. The Standard & Poor’s 500 Index of large US companies returned 29 per cent through 27 th November compared with a loss of 2.2 per cent for the MSCI Emerging Markets Index of 818 developing-world stocks.

The US economy On the rebound from recession, a ‘new America’ is seen as unlikely to resume its role as global consumer of last resort “When the US grew at a healthy pace, its citizens were buyers, fuelling demand for the goods China and other nations produced. They kept the world economy humming. It may not work that way anymore.” In his preview of the January issue of Bloomberg Markets magazine, Simon Kennedy reported that strengthening in the US economy and weakening in China, India, Brazil and elsewhere reverses the trend that had shaped global growth since 2008. In the view of economists surveyed by Bloomberg News , a rebounding US is giving less support to global growth than in the past. Home-grown demand and production are more important drivers of the world’s biggest economy than they were a decade ago. Oil and gas exploration and production are adding to growth, and the country is spending less on imported energy. Mr Kennedy also noted that the cheaper fuel and raw materials are boosting manufacturing as well, making the US more of a competitor to emerging-market nations and less reliable a consumer of their goods. (“America’s Role as Consumer of Last Resort Goes Missing,” 1 st December). This economic outlook has support from informed sources. “Global growth is slowly becoming more of a zero-sum game,” Manoj Pradhan, emerging-markets economist at Morgan Stanley in London and a former International Monetary Fund official, told Bloomberg . “US growth is not reverting to the pre-crisis model, which created lift for everyone else.” Gustavo Reis, senior international economist at Bank of America Merrill Lynch, pointed out that, at one time, a pickup of one percentage point in US economic growth typically boosted expansion elsewhere by 0.4 percentage point. Now, he calculates, the benefit to other countries is moving toward 0.3 percentage point – for an addition of $48 billion to the rest of the world economy instead of $64 billion. A World War II-era term provided Mr Reis with an illustration of what this will mean: “A stronger US economy is an important part of our expectation for healthier global growth, but the oomph to the rest of the world will probably be somewhat less than in the recent past.” ❖ Emerging markets, which fared better than the US and Europe during the global recession, will feel the effects. According to the median forecast of the economists surveyed by Bloomberg News , from an estimated 1.7 per cent growth in 2013 the US is likely to grow 2.6 per cent in 2014 and three per cent in 2015. But if growth is not ignited elsewhere, investors will probably favour US and other developed-nation stocks over emerging-markets currencies and assets.

BigStockPhoto.com Photographer: Aispl

The ‘drone economy’

Not everyone is waiting for the Federal Aviation Administration to draw up regulations for unmanned flying devices “I walk down the street and see drone dollars everywhere. The potential is huge, and thousands of people are already flying them around the US making money.” The speaker was Patrick Egan, a drone consultant who heads the Silicon Valley chapter of the Association for Unmanned Vehicle Systems International (AUVSI), a lobbying group for the industry. In an interview with the news daily USA Today , Mr Egan described a fast-growing “drone economy”, already booming abroad, that is providing American entrepreneurs with new ways of making a living. (“Underground Drone Economy Takes Flight,” 2 nd December). The AUVSI estimates that, when the Federal Aviation Administration (FAA) does issue drone regulations, integrating the devices into US airspace could boost the American economy by at least $13.6 billion in the first three years and by more than $82 billion between 2015 and 2025. It could also create more than 70,000 new jobs, including 34,000 manufacturing positions, in the first three years. In ten years, the group forecast, 100,000 jobs will have been added. The FAA plans to draw up regulations for the futuristic unmanned devices by 2015, in the meantime limiting their commercial use. But, as noted by Alistair Barr and Elizabeth Weise of USA Today , drone entrepreneurs are an impatient lot. “There are many people out there making extraordinary amounts of money,” Gene Robinson, who uses drones to help authorities with search and rescue missions, told the newspaper. “You can even get liability insurance to operate now.” Amazon.com CEO Jeff Bezos drew attention to drones when, on a TV talk show on 1 st December, he talked about his plans to use them to deliver packages. But, given their ability to shoot aerial photos and video steadily, and collect other data cheaply, drones are already seeing service in sectors including construction, movie making, sports, mining, and oil and gas production. Mr Barr and Ms Weise noted that business owners may legally operate their own drones for their own benefit. Many US operators of drones, which can cost under $500, are either hobbyists or providers of drone services free or for donations.

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Wire & Cable ASIA – March/April 2014

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