It was a glorious July 11, with the temps at about 80 degrees and a few clouds in the sky, the kind of summer day we like to remember, when we gathered at the Wakonda Club to join our new ‘Skipper’ Don Flannery for his maiden voyage on the good ship RCDM. He welcomed us and asked Hal Chase to give us words of inspiration, which included some history and perspective on the Four-Way Test. And after that, Hal led us in the Pledge to the flag and a recitation of the Four-Way Test, then we greeted those around us for a moment or two. Randy Worth did the introductions, with no visiting Rotarians, but lots of guests of members or the speaker. While he was at the lectern, Randy also told us about a couple of events the Wheels group is holding and promised more on those in coming meetings. Kathy Coady shared with us a service opportunity, that of helping at Hope Ministries in serving breakfast on Aug. 5 or dinner on Aug. 7. Hope Ministries serves several hundred meals every day of the year at the facility on 6th Avenue, providing a much-needed and appreciated service to the community at large and to those needing some extra assistance, especially.
Art Filean introduced our speaker for the day, Dr. Bob Baur, Chief Global Economist for Principal Financial, and while doing that, Art mentioned that he and Bob were recently discussing how many times Bob had spoken to our club. Their best estimate is in the neighborhood of fifteen times and we know that program is always one of our most popular, for sure. (Later, Bob said that the only downside to that record is that he running out of economist stories to share.) Bob’s family has been farming in the Madison County area for multi-generations, as he was doing until he decided to go back to Iowa State and earn his PhD in Economics, after which he joined the now-Principal Financial, where he has been since. As Art explained in his introduction, Bob’s main responsibility is to travel around the world figuring out what is happening in various places and how those events might affect the company’s opportunities and operations.
As we have found from past presentations, Dr. Baur has a notable understanding of the world economy and a most entertaining was of commenting on it. He spoke to an array of facets, the following being a brief review of his outlook.
- The United States is experiencing its longest ever economic expansion (11 years), but global growth has slowed in recent quarters weighing down the economy.
- Recession is always preceded by an economic slowdown, but economic slowdowns are not always followed by a recession.
- There are three main causes of the ongoing global economic slowdown:
- Inventory build-up in the United States and Europe. This is exacerbated by the US-China “trade war” as manufacturers in both countries find it costlier to export goods.
- High lending standards in China.
- In Europe: Yellow vest protests in France and new German auto emission standards.
- If the causes of the economic slowdown dissipate, global growth will regain momentum and recession will be avoided.
- In fact, the speedbumps that brought the world economic downturn last year seem to be dissipating. Excess inventories are in decline. China loosened restrictions on lending and is trying to boost growth with tax cuts and new infrastructure spending. The short-term Euro area drags from French protests and German auto emission problems are over. Additionally, central banks have turned accommodative and interest rates have plunged.
- Principal Global Investors expects things to get better from here on out, the next US recession is likely to occur as late as 2021. Until then the economic expansion will continue.
- The next US recession will hurt producers, but not consumers. The US consumer is strong because of low unemployment and wage growth which continues to support spending.
(Note: In an act of full-disclosure, this scribe admits that in an effort to provide greater confidence to both himself and the readers that the report reflects what Bob really said, he prevailed upon the offer of the speaker’s associate, Skylar Schneekloth, to note the main points presented.)
As might be expected, there were several good questions from a broad range of areas, noting the interest in and timeliness of the presentation. All the elements came together to make it a good meeting, and we especially appreciate Dr. Baur taking the time to come speak to us.