retail news in context, analysis with attitude

The Washington Post reports that bond and mutual fund giant Pacific Management Investment Co. (Pimco) is out with an annual "secular outlook" study saying that the risk of a recession taking place in the next five years is 70 percent.

The Pimco report calls the current global situation as "a world of insecure of stability," and projects two percent growth and two percent inflation in the US in the near term.

The Post writes that "Pimco, known for its fixed-income bond funds, says that when a recession does arrive, governments will be hard-pressed for solutions because of years of low interest rates. Both the Federal Reserve and the European Central Bank have created easy money by reducing interest rates to near- zero percent. The lower borrowing costs have helped drive up asset prices but have also promoted deficit spending by reducing the interest that governments pay on their debt."
KC's View:
We all know that the economy is cyclical, and that there's always another recession coming. Pimco can be a lot more specific and informed in its projections, but I could make the same prediction - knowing absolutely nothing about economics - and probably stand about as much a chance of being accurate.

The reason I think the prediction is important, though, is because it is something that every company needs to think about as they make plans for new stores, new services, and new innovations. For example, Starbucks is putting a lot of time and money into new, even more upscale coffees ... but I would question the degree to which these could end up being a problem if the economy tanks.