Commodity Prices-Oil

On my way into work this morning I caught myself saying something I never thought would come out of my mouth “Gee, gas is $1.26 a litre, that’s cheap”.  Does anyone else remember when we were all outraged that the price came up over a $1? An interesting article out of the NY Times notes that whether we like to admit it or not, the world runs on oil and is crucial to the health of the economy. If you are looking for some numbers Economists say that a $10 drop in oil can lead to 0.2-0.3% increase in economic growth. If you are thinking that this only affects the airline industry, think again. Oil prices are a major concern for businesses from Pet Care to Mining, with one Pet Food industry representative going as far as to say that it was one of their four main price determinants.  Being able to hedge commodity price fluctuations are critical. Using Active’s Freight solutions allows any business to leverage under-utilized assets to help offset shipping expenses.  With tensions in the Middle East, a surging global demand from emerging markets, a volatile recovery and the increasingly relevant realization that our supply is limited, oil will continue to make a sizable dent in pocketbooks and income statements alike.

The US Dollar 

It wasn’t too long ago that political squabbles over the debt ceiling and record high gold prices crippled the value of the US Dollar. In a classic example of market volatility, Bloomberg is reporting that the USD is gaining ground as turmoil in Europe and a weakening demand for gold has made the dollar a safe haven for investors. We as Canadians need to care about these things for two reasons. Firstly, quite a few of the multi-nationals that operate in Canada have head offices in the United States. Remember the old adage “when the United States sneezes, Canada catches a cold”. Secondly, a strong American dollar means demand for Canadian Primary Sector goods, which makes up about 30% of the economy. From a more microeconomic perspective, risk management is paramount to any multi-national business.  While derivatives offer some stability, Corporate Trade offers the added benefit of flexibility in how inventory is paid for, essentially eliminating the issue of currency volatility in a particular market.

Facebook

In one of the most highly anticipated IPO’s (Initial Public Offering) of the last few years, Facebook went public, opening at $38 on Friday May 18th. Since than questions have been raised as to where growth will come from as the Social Media giant seeks to please investors. The real issue here comes from what is often a struggle for many public companies; ‘how do we please shareholders, who often take short-term views, and maintain that innovative reputation that users have come to expect?’ The ability to monetize users has been a struggle for social media companies across the board and it will be interesting to see how not only Facebook’s situation plays out but what type of precedent this sets for social media advertising as a whole.

Ad Spend:  A Light at the End of the Tunnel?

Any marketer knows that when times get tough the first thing to get slashed is the advertising budget.  However, recent predictions from ZenithOptimedia noted growth across the industry with global advertising expecting to reach $489 Billion this year, a 4.8% increase from 2011. This trend is expected to stay positive over the next couple of years with spending expected to continue to grow in 2013 and 2014. Not surprisingly, the fastest growing medium will be internet advertising (a savior for Facebook?), expected to post double-digit growth over the next few years. The implications of such a report are positive. Increasing advertising spends suggests a renewed business confidence which can only be positive for economic growth over the next few years.

*This report is being referenced from B2B magazine, April issue.