At this stage of the housing recovery, the falling homeownership rate turns out to be misleading. In fact, for young adults, who were hit especially hard in the recession and housing crisis, the decline in their homeownership rate might paradoxically be a sign of improvement.
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When the homeownership rate steers us wrong, the “headship rate” ... can come to the rescue. It’s the percent of adults who head a household. Put another way, it is the ratio of households to adults. If there are 200 million adults living in 100 million households, the headship rate is 50 percent. A higher headship rate means fewer adults, on average, per household. Over the longer term, demographics explain shifts in the headship rate (and in labor force participation, for that matter). An aging population, for instance, typically increases the headship rate because older adults are more likely to head their household than younger adults are because many young adults live in their parents’ home or with housemates.
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In fact, the headship rate is the key to how much the housing recovery contributes to economic growth. The headship rate and the population determine the total number of households, so a rise in the headship rate means more new households, all else equal.
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Headship is poised to increase. Young adults still living with their parents won’t do so forever, and the Current Population Survey headship rate in 2013 – even with its recent rise — is still below its 20-year average. That will prompt more new construction.
| Net Orders | Settlements | Average Closing Price | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Qtr. Ended: | 12/13 | 12/12 | % Chg | 12/13 | 12/12 | % Chg | 12/13 | 12/12 | % Chg |
| D.R. Horton | 5,454 | 5,259 | 3.7% | 6,188 | 5,182 | 19.4% | $263,542 | $236,067 | 11.6% |
| PulteGroup | 3,214 | 3,926 | -18.1% | 4,964 | 5,154 | -3.7% | $325,000 | $287,000 | 13.2% |
| NVR | 2,631 | 2,625 | 0.2% | 3,342 | 2,788 | 19.9% | $365,300 | $331,900 | 10.1% |
| The Ryland Group | 1,428 | 1,502 | -4.9% | 2,178 | 1,578 | 38.0% | $314,000 | $270,000 | 16.3% |
| Beazer Homes | 895 | 932 | -4.0% | 1,038 | 1,038 | 0.0% | $279,300 | $235,500 | 18.6% |
| M/I Homes | 793 | 673 | 17.8% | 1,120 | 887 | 26.3% | $292,000 | $273,000 | 7.0% |
| Net Orders | Settlements | Average Closing Price | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Calendar Year | '13 | '12 | % Chg | '13 | '12 | % Chg | '13 | '12 | % Chg |
| D.R. Horton | 25,315 | 22,513 | 12.4% | 25,161 | 19,954 | 26.1% | $255,646 | $228,395 | 11.9% |
| PulteGroup | 17,080 | 19,039 | -10.3% | 17,766 | 16,505 | 7.6% | $305,000 | $276,000 | 10.5% |
| NVR | 11,800 | 10,954 | 7.7% | 11,834 | 9,843 | 20.2% | $349,043 | $317,073 | 10.1% |
| The Ryland Group | 7,263 | 5,781 | 25.6% | 7,035 | 4,897 | 43.7% | $296,000 | $262,000 | 13.0% |
| Beazer Homes | 4,989 | 5,111 | -2.4% | 5,056 | 4,603 | 9.8% | $262,004 | $229,126 | 14.3% |
| M/I Homes | 3,787 | 3,020 | 25.4% | 3,472 | 2,765 | 25.6% | $286,000 | $264,000 | 8.3% |
| Total | 70,234 | 66,418 | 5.7% | 70,324 | 58,567 | 20.1% | $289,824 | $261,263 | 10.9% |
Information received since the Federal Open Market Committee met in December indicates that growth in economic activity picked up in recent quarters. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate declined but remains elevated. Household spending and business fixed investment advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.
Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee continues to see the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.
The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Richard W. Fisher; Narayana Kocherlakota; Sandra Pianalto; Charles I. Plosser; Jerome H. Powell; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.
emphasis added
10 social media influencers in Supply Chain industry that newbies like me should know (Inspired by StrategicSourcing.com)
By taking an EU-wide approach and setting achievable targets, the European Commission is hoping energy buyers will be able to achieve environmental targets without compromising competitiveness
This January, the EU Commission released its targets for energy use, looking forward to 2030. After seven years of dawdling and watching Europe fall further and further behind global counterparts on the competitive stage, decision makers admirably admitted the failings of government green energy subsidies.
For many, these subsidies, which were bound up with over-ambitious targets for emissions and renewables in the energy mix, have been a negative influence on the EU’s current position in the global marketplace.
Energy buyers will welcome the scrapping of the previous ’hard and fast approach’. While targets remain ambitious – 40% and 27% for carbon emissions reduction and use of renewables in the mix respectively – the key difference lies in the EU-wide fulfilment of these objectives, rather than nationally-bound goals.
Finally, it seems, conscious of how embarrassingly far Europe now lags behind competitors in the US, China and Russia (among others) the floor has been opened up to shale exploration, with no official barriers standing in the way of some of Europe’s less-developed economies looking to reduce their reliance on coal and other dirty energy.
The benefits (and, admittedly, the drawbacks) of shale gas exploration are now well-known – consider the energy price gap between Europe and the US; in 2011, buyers of energy in the former would have been handed bills as much as four-times higher than their counterparts across the pond; staggering price hikes have placed Europe at a distinct disadvantage for some time now, making somewhat of a mockery of legitimate exercises such as usage profiling and country-level contract management.
Giving regional procurement practitioners more freedom to explore and decide how they will contribute to the new energy and climate targets – as well as affording considerably more competitive momentum to European industry more generally – will likely prove the biggest win, opening up the floor to forward-thinking functions seeking to add value to the wider business through innovative sourcing programmes, while affording an amount of slack to the industries blighted by stagnation (many of which energy-intensive) via a renewed focus on what can be considered realistic goals.
oday, the Data & Analytics division of Black Knight Financial Services (formerly the LPS Data & Analytics division) released its latest Home Price Index (HPI) report, based on November 2013 residential real estate transactions. The Black Knight HPI combines the company’s extensive property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. ZIP codes. The Black Knight HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales.
Click on graph for larger image. 
The percent of home over $300K declined to 20% in January 2009. Now it has rebounded to around 39%. And less than 10% were under $150K in 2013.
FHA loan limits are set at the county level, and there are 3,234 counties in the United States. Loan limits will not change for 2014 in 2,493 counties, most of which remain at the loan limit floor of $271,050. However, 652 counties will have lower limits and 89 will have higher limits. The Mortgage Bankers' Association has calculated that 92 percent of the counties located in non-metropolitan areas are unaffected. The situation is very different in metropolitan areas. While limits are unchanged in 50.7 percent of the counties located in Metropolitan Statistical Areas (MSAs), they will decline in 44.4 percent while increasing in 4.9 percent of the areas. The changes in some markets are larger than would be predicted by either the drop in the ceiling from $729,750 to $625,500 (a 14.3 percent decline), or the change in the median home price multiplier from 125 percent to 115 percent (an 8 percent decline). This has two primary causes: a change in the base year for determining median house price and a revision of MSA boundaries.
...
While the impact of the change in the FHA loan limits is very modest overall, some communities will be very adversely affected. These are communities where the drop in the limits is large and FHA guarantees a high percentage of mortgages.
On Friday, amid California's driest year on record, Gov. Jerry Brown declared a drought emergency in the state. As days pass without snow or rain, dairymen, farmers and other livestock producers are finding themselves in the same predicament as Imhof. Without water to irrigate, produce growers fear they will have to leave some fields fallow.
Ranchers and farmers say that as long as the drought continues, the nation's largest agricultural state will remain in turmoil, with repercussions stretching to consumer pocketbooks in the form of higher prices for such basic staples as meat, milk, fruit and vegetables.
COMMERCIAL PROPERTY PRICES CONTINUED THEIR STEADY UPWARD TRAJECTORY IN NOVEMBER: With the U.S. economy on more solid footing during the fourth quarter of 2013 and demand for commercial real estate space on the rise, pricing continued on a steady upward trajectory in November 2013. The two broadest measures of aggregate pricing for commercial properties within the CCRSI—the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index—advanced by 0.8% and 1.1%, respectively in November 2013, and rose by a more robust 10.9% and 7.8%, respectively, over the last year.
...
ABSORPTION EXPANDS AT FASTEST RATE SINCE 2007: Tenants occupied an additional 380 million square feet of office, retail and industrial space throughout the U.S. in 2013, the largest annual gain in net absorption over the past six years. The Investment Grade segment of the market continued to dominate in space absorption. However, the pace of absorption in the General Commercial segment has improved significantly as the recovery is accelerating in the secondary and tertiary markets. The General Commercial segment’s share of total net absorption increased from being less than 30% for the last several years to 32% in 2013.
...
DISTRESS SALES REMAIN LOW: The percentage of commercial property selling at distressed prices was slightly more than 13% in November 2013, down roughly two-thirds from the peak in 2011. Technology and energy-driven markets including Houston, Denver, Dallas, and Austin have experienced some of the strongest declines in the share of distress property sales activity over the last year, with a reduction of 80% or more.
emphasis added
Last month’s Bay Area home sales were the slowest for a December in six years, the result of a constrained supply of homes for sale. ...
A total of 6,714 new and resale houses and condos sold in the nine-county Bay Area last month. That was the lowest for any December since 2007, when 5,065 homes sold. Last month’s sales were up 0.8 percent from 6,659 in November, and down 12.7 percent from 7,688 in December 2012, according to San Diego-based DataQuick.
Sales almost always increase from November to December, usually around 8 percent. Last month’s sales were 21.3 percent below the December average of 8,529 since 1988, when when DataQuick’s statistics begin. ...
Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 4.5 percent of resales in December, up from 3.7 percent the month before, and down from 12.1 percent a year ago. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 17 years is 10 percent.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 10.5 percent of Bay Area resales last month. That was up from an estimated 9.5 percent in November and down from 23.6 percent a year earlier.
Last month absentee buyers – mostly investors – purchased 23.0 percent of all Bay Area homes. That was up from November’s revised 20.6 percent and down from 26.0 percent in December 2012. Absentee buyers paid a median $439,000 last month, up 35.1 percent from $325,000 a year earlier.
In the wake of the 2012 U.S. presidential election, the political idea of managing one’s ‘optics’ spilled over into the corporate world. The pesky but popular buzzword captured an increased focus on how everything looks to observers from timing to backdrops to the tone of a statement or presentation. It is a topic I took on in an October Procurement Insights Post, ‘Managing Procurement’s Optics’.
My conclusion at the time was that we all have optics, whether we are actively managing them or not. The people and organizations we come into contact with in high stakes situations take cues from otherwise innocuous things like running late for a meeting, bringing a second person into a discussion or inquiring into the reasons behind a request. Despite the potential for establishing authority or creating negative impressions, optics are a passive element. They communicate clear meaning from the background.
Again taking direction from the political sphere, 2014 promises to be the year of executives and corporations ‘controlling the narrative’. In other words, whether the news of the moment is good or bad, how will you explain (positive) or spin (negative) your circumstances. Unlike optics, controlling your narrative is an active process, made more complex by the need to get the message out right, first, and using the most advantageous channels.
At the end of December, a USA Today business writer took a political story – the YouTube video where Chiara De Blasio explained her struggle with depression and substance abuse – and applied it to the corporate world (De Blasios Tell their Story Their Way, Michael Wolff). Drawing such comparisons between different spheres is one of my favorite approaches, and I appreciated that he took a political image management tactic and applied it to the corporate world, especially in today’s social-media heavy environment.
Controlling your narrative is important, but is only effective when you are the first to tell your story and when the tale you tell endears you to your audience. As Wolff stated, “In every significant corporation in the nation, controlling the narrative has become one of those feely-feely things that unemotive CEOs and CFOs, with a growing amount of anxiety, understand they really don’t comprehend and about which they need outside consultants to hold their hands.”
While those “unemotive CEOs and CFOs” may or may not naturally induce our sympathy, it is easy for procurement professionals to draw the short line to the CPO and realize that he or she is in the exact same boat – and procurement needs to control their internal and external narratives simultaneously. Procurement is one of the few functions that regularly has contact with internal stakeholders, executive leadership and members of the first and second tiers of the supply chain. Like pervasive optics, we need to control our narrative in all of these interactions as well.
Why is spending being reduced? Why is a contract or category being renegotiated? The answers to these questions will be different when procurement is addressing an internal stakeholder versus fielding questions from current or prospective suppliers.
The most important commonality in all procurement narratives is resisting the urge to sound like a victim or like a function at the mercy of larger organizational and market-driven forces. In both cases, the message will resonate differently when delivered as a proactive statement rather than as a response to a question. Getting in front of a message is the best way to control it – especially through narrative.
There is no point in controlling your narrative unless you have something you are trying to accomplish. De Blasio was looking to address a sensitive topic that might otherwise have been a detraction from his campaign to become the next mayor of New York City. Procurement organizations may be looking to establish their authority internally or maximize negotiating leverage externally.
Regardless of the goal, it is critical to remember that narratives present an opportunity to create bonds and build relationships. Keeping an eye to the potential for collective benefit, or pointing out shared struggles not only furthers the cause in the short term, but improves working relationships. Oh yes, and it also improves procurement’s optics by making the function look more open, transparent, and approachable.
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With all the justified concern about finding the right people for a fast-changing procurement profession, here is a suggestion from the marketing world that could well make sense: try and buy.
With all the justified concern about finding the right people for a fast-changing procurement profession, here is a suggestion from the marketing world that could well make sense: try and buy.
Marketers of everything from cars to consumer magazines to software to toys use that strategy to lure customers. In procurement’s case, CPOs could turn the concept around and combine it with a rigorous internship program; give candidates a chance to find out what procurement is really like by handing them some real project responsibility and seeing how they perform without committing to hiring them full time until the end of the project. Pay them for their work to show that you are serious.
Internships are nothing new, of course. But in a field such as procurement, where soft skills are as important as hard skills, they can be revealing. Companies such as Whirlpool, Daimler Chrysler and others have offered internships. One web development company, Automattic, uses what the company calls "auditions" to find new employees.
Founder Matt Mullenweg says the system, in which candidates get actual work assignments, has worked well for his company. It doesn’t replace the need to review resumes, but it certainly can shed more light on a person’s skills, instincts, willingness to learn and work, and passion for excellence than a mere list of previous employers and responsibilities.
This isn’t meant to denigrate resumes, advanced college degrees or such things as certifications from professional associations. Certainly, they are all important and CPOs should be sure to check them. But by themselves, they can’t tell you how someone will actually perform or interact with the rest of your team. Nor can an interview or reference checks do that. A cynic might say that an interview - even several interviews - tests a candidate’s acting ability as much as anything else, and a reference could be no more than a testimonial from a friend. Interviews and reference checks are important, but can give only a partial glimpse into a candidate’s analytical ability, project-management skills, change-management skills, or customer orientation, all things that procurement executives across Procurement Leaders Forums report as important. And, interviews don’t fully reveal a candidate’s passion for continuous improvement or ability to work cross-functionally, all attributes that Videojet Technologies director of procurement Ryan Hartz, who I spoke with at length about the subject a couple of months ago, and others insist are critical.
You can’t really know a person’s ability or personality until you give them a job. A try-and-buy internship will give you that insight - and it will give candidates a chance to know if they want to work with you.
In 2013, the housing markets with the biggest increases in asking prices were all rebounding from severe price drops in the housing bust. Home prices are still in rebound mode, but this effect will weaken in 2014. Job growth, in contrast, mattered little for price gains in 2013 but helped drive rent increases.
In December, the year-over-year increase in asking home prices slowed for the first time since the price recovery began in early 2012: prices rose 11.9% year-over-year in December, compared with November’s 12.2% year-over-year increase. Asking prices rose 0.4% month-over-month, seasonally adjusted, the third straight month of gains less than 1%.
...
Overall, regression analysis shows that recent price gains are most strongly associated with the severity of the local housing bust. Markets where prices fell most during the bust (roughly 2006 to 2011, but varies by metro) offered bargains for investors and other buyers who have helped bid prices back up over the past two years. A second important factor is foreclosures: adjusting for other factors, metros with a higher foreclosure inventory today – including many in Florida – have slower price growth. Job growth, however, had little impact on local home price gains in 2013: the relationship between job growth and price gains was positive but not statistically significant.
Therefore, year-over-year price gains in December 2013 are still primarily a reaction to the housing bust, but this rebound effect is fading as we enter 2014. Looking at the quarter-over-quarter price changes throughout 2013, the relationship between the severity of the housing bust and the recent price recovery was stronger earlier in the year than later in the year. More specifically, the correlation between peak-to-trough price change (FHFA) and the Trulia Price Monitor quarter-over-quarter change was -.59 in March; -.45 in June; -.43 in September; and -.33 in December. This correlation is moving closer to zero, which signifies that the rebound effect is fading.
As the housing market continues to recover, factors other than the rebound effect – like job growth – will matter more for price gains. That means slower but more sustainable price increases. emphasis added
Last summer, North Carolina slashed the amount of cash it gave to people after they lost their jobs and the state also reduced the number of weeks they could receive benefits. Within several months, the unemployment rate fell a few ticks and by November it fell to a five-year low.
...
Government data also shows that more than 22,000 North Carolinians found work since the cutoff and the number of unemployed sank by nearly 73,000 to 344,000.
What the data doesn’t tell us, however, is what happened to all the people no longer classified as unemployed. While some found a job, others may have retired, ended up on welfare, moved in with family members, sought disability payments or fled to a nearby state with better benefits. We just don’t know.
In their discussion of monetary policy in the period ahead, most members agreed that the cumulative improvement in labor market conditions and the likelihood that the improvement would be sustained indicated that the Committee could appropriately begin to slow the pace of its asset purchases at this meeting. However, members also weighed a number of considerations regarding such an action, including their degree of confidence in prospects for sustained above-potential economic growth, continued improvement in labor market conditions, and a return of inflation to its mandate-consistent level over time. Some also expressed concern about the potential for an unintended tightening of financial conditions if a reduction in the pace of asset purchases was misinterpreted as signaling that the Committee was likely to withdraw policy accommodation more quickly than had been anticipated. As a consequence, many members judged that the Committee should proceed cautiously in taking its first action to reduce the pace of asset purchases and should indicate that further reductions would be undertaken in measured steps. Members also stressed the need to underscore that the pace of asset purchases was not on a preset course and would remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the efficacy and costs of purchases. Consistent with this approach, the Committee agreed that, beginning in January, it would add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month. While deciding to modestly reduce its pace of purchases, the Committee emphasized that its holdings of longer-term securities were sizable and would still be increasing, which would promote a stronger economic recovery by maintaining downward pressure on longer-term interest rates, supporting mortgage markets, and helping to make broader financial conditions more accommodative. The Committee also reiterated that it will continue its asset purchases, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. In the view of one member, a reduction in the pace of purchases was premature and, before taking such a step, the Committee should wait for more convincing evidence that economic growth was rising faster than its potential and that inflation would return to the Committee's 2 percent objective.
In their discussion of forward guidance about the target federal funds rate, a few members suggested that lowering the unemployment threshold to 6 percent could effectively convey the Committee's intention to keep the target federal funds rate low for an extended period. However, most members wanted to make no change to the threshold and instead preferred to provide qualitative guidance to clarify that a range of labor market indicators would be used when assessing the appropriate stance of policy once the threshold had been crossed. A number of members thought that the forward guidance should emphasize the importance of inflation as a factor in their decisions. Accordingly, almost all members agreed to add language indicating the Committee's anticipation, based on its current assessment of additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments, that it would be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's longer-run objective. It was noted that this language might appear calendar-based rather than conditional on economic and financial developments, and one member objected to having forward guidance that might be seen as relatively inflexible in response to changes in members' views about the appropriate path of the target federal funds rate. However, those concerns generally were seen as outweighed by the benefit of avoiding tying the Committee's decision too closely to the unemployment rate alone, while still being clear about the Committee's intention to provide the monetary accommodation needed to support a return to maximum employment and stable prices.
emphasis added
We are in the midst of our survey into outsourcing and global sourcing. Partly, this is in response recent trends, but is outsourcing only one way?
We are in the midst of our survey into outsourcing and global sourcing. Partly, this is in response recent trends, but is outsourcing only one way?
If you are interested in hearing more about the research, please follow this link.
One respondent to our survey already believes that outsourcing “has had its day”. We have heard many talk about in-sourcing and on-shoring for a while now. It seems the most high profile business topic that retains interest in current affairs.
There are particular, one-off examples that fuel this focus. Wal-Mart has publicly pledged to return $50 billion of offshored spend back to the US. Lenovo, the Chinese inheritor to IBM’s former laptop business, is opening a new production facility in the US.
This attracts a lot of attention. But a few instances do not make a trend.
We have been surveying for such activities frequently over the last years. It is still a very rare activity within the world of procurement. More outsourcing and more offshoring is still the flavour of the month.
It seems be to a taste that CPOs will savour for the foreseeable future.
The tide has yet to turn. But does this skew the conversation? As opposed to outsourcing, which is the de fact emphasis, should we be talking about ‘rightsourcing’, which may lead to increasing the provision of external spend.
This is an important distinction. There is a balance that must be struck between the loss of control in outsourcing and the potential costs savings. Similarly, there is a similar balancing act to strike between the disruption caused by insourcing and the scale benefits that this may bring in scale. In each particular context, there is a particular balance which is right for the company. There is not, as many seem to maintain, an inevitable marched towards vertical disintegration.
It is surprising to see, even in the responses we have been fielding so far, that this view is not commonly held within purchasing.
We hope to going into more depth on these issues in the coming weeks and months. To find out more, click here.
I have discussed the factors that have held back the recovery, not only to better understand the recent past but also to think about the economy's prospects. The encouraging news is that the headwinds I have mentioned may now be abating. Near-term fiscal policy at the federal level remains restrictive, but the degree of restraint on economic growth seems likely to lessen somewhat in 2014 and even more so in 2015; meanwhile, the budgetary situations of state and local governments have improved, reducing the need for further sharp cuts. The aftereffects of the housing bust also appear to have waned. For example, notwithstanding the effects of somewhat higher mortgage rates, house prices have rebounded, with one consequence being that the number of homeowners with "underwater" mortgages has dropped significantly, as have foreclosures and mortgage delinquencies. Household balance sheets have strengthened considerably, with wealth and income rising and the household debt-service burden at its lowest level in decades. Partly as a result of households' improved finances, lending standards to households are showing signs of easing, though potential mortgage borrowers still face impediments. Businesses, especially larger ones, are also in good financial shape. The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for U.S. economic growth in coming quarters. But, of course, if the experience of the past few years teaches us anything, it is that we should be cautious in our forecasts.
emphasis added
