A monthly publication for middle market business leaders
The Real Economy
Business Cycle Enters Late Stages
This edition of RSM’s monthly publication,
The Real Economy, features insights from Joe Brusuelas, the firm’s chief economist, about where the current business cycle is headed, and when the Federal Reserve is likely to take more aggressive action to bolster economic growth. The post-economic expansion phase of the current cycle is clearly on the minds of economic policymakers and has been a topic of conversation in several of the most recent meetings of the Federal Open Market Committee.
Brusuelas also offers his take on global trade conditions as the United States’ trade spat with allies intensifies. He estimates that in aggregate the proposed tariffs, if implemented, could shave 0.2 percent from potential growth and put some 2 million jobs at risk.
The Real Economy offers additional insight about the middle market and cyber-risk from RSM’s Daimon Geopfert, principal and national leader, security, and privacy.
Some considerations include the following for internal audit executives:
With the business cycle coming closer to its end than its beginning, and the policy rate well below what has been considered normal at this point of the business cycle, the fiscal authority will have only a few options to mitigate a future economic downturn, likely through a combination of lower real rates and a series of unorthodox monetary policy steps. Although the short-term outlook is still positive, companies are considering the impacts of an economic downturn. A review of growth projections for the near- and longer-term, factoring in changes to the prime lending rate would be beneficial from a planning perspective and an area where internal audit executives could provide some perspective and review. Internal audit could look at Treasury functions including existing debt maintenance, planned borrowing, and the cost of capital.
As we continue to see increased trade tensions and rising costs for raw materials, audit executives will need to take a close look at the impact of the supply chain and consider how rising costs may affect areas of manufacturing, pricing, and related operations. Canada and Mexican trade partners who have taken the risk of a breakdown in NAFTA much more seriously than their American counterparts are well along the way toward identifying and arranging for alternative sources of inputs in earlier stages of production to meet demand. In addition, the general disruption associated with the imposition of tariffs, quotas and an array of nontariff barriers will distort patterns of gross private investment in general and capital expenditures.
Finally, we are seeing the middle market as a prime target for hackers and cybercriminals, especially for larger midmarket companies who have valuable information and may not have invested heavily in security. Cybercriminals are evolving, with greater instances of ransomware as an approach to more direct gain. Internal audit should be reviewing management’s security program, including backup and recovery capabilities and cyber insurance coverage as effective ways to protect servers and systems, and offset implications of an incident.
For a deeper dive into these issues, click on the link below for this month’s issue of
The Real Economy.
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The Real Economy
The U.S. middle market makes up one-third of the country’s economy and employs one-third of its workforce, yet this economic growth engine is often overlooked. As the leading provider of assurance, tax and consulting services to middle market businesses, RSM wants to change the conversation.
The Real Economy is a monthly publication to help the middle market anticipate and address the unique issues and challenges facing their businesses and the industries in which they operate. Written by our chief economist, Joe Brusuelas, and including the insights of professionals throughout the firm,
The Real Economy is RSM's answer to making sure the unique needs and opportunities of this important segment of our economy are given the attention they deserve.