The European Union slipped into a recession after reporting negative GDP Growth for the second quarter in a row. While our economy is growing due to robust consumer spending, a strong labor market, and a stock market rally, Europe has suffered for a variety of reasons.
A spike in energy costs, caused partially by the War in Ukraine, has hurt the continent. Food prices have softened recently, but remain higher than the European Governments would like.
Global trade, one of the main economic drivers of the Eurozone, has slowed in the last couple of years. Travel markets also remain soft.
I wrote last week that Germany, Europe’s largest economy, slipped into a recession. Ireland and Finland also showed weakness. Given their size, the entire region suffered, although France, Spain, and Italy are all doing well.
Economists are predicting a slow and protracted recovery. Higher borrowing costs from European Banks have slowed things down considerably.
Does any of this sound familiar?
Let me leave you with this.
European Economists hadn’t predicted that they were in a recession. This came as a surprise to many.
Eurostat, the agency that tracks Europe’s overall economy, had thought that the economy would grow slightly in the first quarter. But when Germany’s numbers came in last week, their overall numbers slid into the red.
The main difference between Europe and the US is consumer spending. Americans are spending freely on the things we couldn’t do during the pandemic like travel and dining.
Given the protracted inflation that Europe has suffered, Europeans have had to cut their spending. Consumer spending was down in both the fourth quarter of last year, and our most recent one. Imports also fell sharply in those quarters.
This my way of telling you to be ready. If it happened in Europe, it could easily happen here as well.
Let’s remember that a lot of the extra money from the pandemic is still sitting in company checking accounts. I can’t tell you how many clients I have that still have six figure banks accounts for the first time in my history with them.
The money won’t last forever. What will happen when those checking accounts empty and things go back to some sense of normalcy?
People will stop spending money, and what will happen then? Probably the same thing that just happened in Europe.
Trim the fat. Be conservative in your hiring. Be careful with your new projects. Now isn’t the time to get over-extended.
In other words, be ready. We all pray that it won’t happen and we’ll have a soft landing, but we all must be ready.
On a lighter note, I celebrated another birthday yesterday. I turned 28 for the 29th time. Our Good Lord gave me another turn around the sun.
I’m thankful for many things, including my wonderful clients, my friends, and all of my readers. In the past few years, this column has turned into quite a thing. I’m read by over six thousand entrepreneurs, three times every week.
My most sincere wish, is that I’ve been helpful. For my job, my calling in this life, has always been to serve.
If there is ever anything that I can do for any of you, you have but to ask.
As an inducement, we’re offering 33% off your first six months of bookkeeping and / or the first three months of electronic payroll services on a complimentary basis. In order to claim this benefit, please click on the appropriate button below and provide your contact information. We’d love to help.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, M&A Due Diligence, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.SalarySolutions.net
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.