May ended with a whimper and it does not look like June is going to be much better.
Towards the end of last week, we saw the sharemarket slump to its worst monthly result in two years; we saw house prices drop sharply in May; and we saw the manufacturing sector tumble yet again. CommSec economist Craig James, who has been quite positive in the last two years, rightly said on Friday that the data was “dreadful”.
Things got worse over the weekend, with ugly jobs data out of the US sending global markets tumbling. Australia’s market and the dollar are likely to be under pressure this week as investors come to terms with what are some serious headwinds – China slow, Europe in crisis mode and the US a long, long way from full health.
Australian entrepreneurs might not feel the direct impact of these problems, but the impact on consumer and business confidence will be unavoidable. Spending is frozen and the thaw is nowhere in sight.
Westpac’s Bill Evans shocked many when he tipped four more 0.25% rate cuts before the end of 2012. That now seems a lot more likely.
It’s hard to see what will light the gloom in the global economy, but I did want to highlight one little light – the sort of light you see when you connect your computer to a data cable.
Last week, Cisco released its Visual Networking Index, which is the company’s ongoing attempt to track the incredible movement in web traffic.
Cisco’s prediction is amazing. Internet traffic, which increased eightfold in the last five years, will increase a further threefold in the five years between 2011 and 2016. In 2016, the gigabyte equivalent of every movie ever made will cross global IP networks every three minutes.
The growth, not surprisingly, is being driven by big jumps in the number of new connections in the Middle East, Africa and Latin America; traffic in the Middle East and Africa will grow at a compound annual rate of 57% between 2011 and 2016.
But it’s also interesting to see what types of traffic will grow. Wireless traffic is tipped to overtake wired traffic by 2016, and mobile traffic is tipped to increase 18-fold in the next 15 years.
Video is tipped to account for 54% of all consumer internet traffic by 2016. Cisco says it would take over 6 million years to watch the amount of video that will cross global IP networks each month in 2016.
I urge you to read the predictions and spend a little while thinking about what they mean for business, and for your business particularly.
The key conclusion I draw is the internet revolution is far from over. The growth in traffic and connections suggest the net could change business in ways we still haven’t thought of.
New markets will be opened up. New products and services will be created. New business models will emerge. The possibilities for innovation and creativity remain enormous.
My second conclusion is that Australia will need fast, reliable broadband to stay competitive in a connected world. The Federal Government hasn’t done a very good job of selling the NBN – perhaps this report can help.
My third conclusion is that Australian SMEs who still think they can get by without a web presence are kidding themselves. Frankly, few will survive past 2016 and they’ll have no one to blame but themselves.
Growth in internet connections and internet traffic growth aren’t a magic bullet for a global economy that is down for the count.
But that growth could still spark individuals, businesses and potentially entire economies.