MGPS

MGPS

November 08, 2007 09:00 ET

MGPS: Fears of Recession Increasing

TORONTO, ONTARIO--(Marketwire - Nov. 8, 2007) - The U.S. dollar hit a record low while the Canadian dollar and the Euro hit record highs. The surge in the price of oil and gold has encouraged investors to buy assets in commodity-producing nations which are helping drive the U.S. dollar down. Oil is expected to reach $100 U.S. a barrel and there are fears of demand outstripping supply.

High oil prices will mean a costly winter for American consumers. Even though only 7% of American households use oil, natural gas and electricity prices tend to rise along with oil prices. This means less money to spend on other items.

The low dollar has resulted in more U.S. exports and has helped reduce the trade imbalance with Europe. Not surprisingly, Europe is not thrilled. French President Nicolas Sarkozy says the U.S. risks a 'trade war' if the Bush administration does not stem the dollar's fall.

What does all this mean for American corporations?

2008 will likely be a tough year. Corporate debt is predicted to rise and corporate bond defaults are forecast to rise from 1% to 4%. This will make it harder to borrow money. High oil prices will continue to drive up costs while a weak U.S. dollar will reduce buying power. Overall, costs for the American manufacturer will increase while revenues will stagnate, or worse, decline. The squeeze on margins is likely to continue into 2008.

While corporations can do little to strengthen the U.S. dollar, they can look for ways to reduce costs, excluding labour. Non-core costs and non-essential costs are often buried amongst core and essential costs. Ferreting out these costs and eliminating low hanging fruit will go a long way to helping improve margins and the overall health of the organization.

About MGPS

MGPS is a management consulting firm that specializes in reducing non-core expenses. These expenses tend to be indirect, hidden and scattered throughout the organization. MGPS identifies hidden costs and develops and implement efficient processes to drive out unnecessary expenses. The end result is increased cash flow and greater profitability.

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