What will the world do if the USA defaults on it's debt of 20 trillion dollars?

Despite Trump's tough talk, trade gap hits 9-year high

According to the International Trade administration “the United States has been running consistent trade deficits since 1976 due to high imports of oil and consumer products. In 2017, the biggest trade deficits were recorded with China, Mexico, Japan, Germany, Vietnam, Ireland and Italy and the biggest trade surpluses with Hong Kong, Netherlands, United Arab Emirates, Belgium, Australia, Singapore and Brazil. Mexico is the United States' 2nd largest export market and the 3rd largest supplier of imports.”

One school of economics supports the notion that if “the United States runs a large trade deficit, foreign sellers simultaneously accumulate large amounts of U.S. dollars. These dollars cannot be spent inside their own countries, so they need to be invested somewhere. Much of this trade deficit-driven accumulation of dollars is used to purchase American stocks and bonds, pieces of American companies, and other U.S. assets.” China and Japan are a good example of the notion.

The impending reality for instability arises when foreign investors in U.S. assets begin to worry that a permanent trade deficit is going to make the U.S. dollar less valuable relative to other reserve currencies. If this issue prompts a group of foreign investors to sell their U.S. assets at the same time, then the value of the U.S. dollar could fall substantially in a short period of time triggering a potential panic in financial markets.

the Federal Reserve is independent of the Treasury Department, and is not required to purchase federal securities whenever there is a deficit. If the Fed does not do so, deficits may be completely bond-financed. On the other hand, the record indicates that deficits are not completely financed by printing money alone as it appears that the Fed monetizes fractions of the deficits.

The historical record of fiscal policy indicates that from “1790 to the introduction of the federal income tax in 1913, government spending was just 2.3% of GDP. During the century after 1913, government spending as a share of GDP increased to 16.7%. It reached 20% in the years after World War II. And by 2011, federal spending was 24% of GDP.” The only meaningful solution for a fiscal deficit is to spend less and set tax rates to generate sufficient revenue over the business cycle to fund government spending. Moreover, the tax rate should be permanent to lessen uncertainty and allow individuals and businesses to plan for the future. A lees unsavory solution would be to run the US economy as an empire and charge the “colonies” assessments to compensate fiscal deficits generated by being the “protector” of the global status quo.

Lance Roberts, a portfolio manager recently wrote: “Currently, the market is pushing towards 4-standard deviations (99.9 percentile) above the 52-week mean…this is ‘rarefied air’ for the market historically.” Roberts notes that this statistical aberration hasn’t occurred since 1981. The market is at levels that are, to put it bluntly, statistically stupid and he adds: “Previously, large deviations from a long-term mean have coincided with mild to severe market corrections and crashes. Given the current extreme deviation, one can only assume a negative outcome in the future.”

Central bankers agree that a reserve currency status isn't without its downsides and the Federal Reserve must constantly adjust its balance between current domestic economic politics and the realities of global financial markets. The financial crisis of 2008 was exacerbated by budget deficits and large debt to GDP ratios.

Monetary policy used by the Feds includes “quantitative easing” which really means printing more money into the economy to keep money supply abundant and interest rate low. The method is however a temporary solution until growth and capital gains return to the overall economy otherwise inflation can set in as the value of the dollar shrinks. Economic politics can nevertheless upset sound monetary policy such as the recent tax cut of a trillion dollars Trump just sign into law.

Trump, the "stable genius" ordered the acceleration of the money printing press to pay for his tax cuts. “The United States reported a government debt equivalent to 106.10 percent of Gross Domestic Product in 2016. Historically, US Government Debt to GDP in the United States has averaged 61.14 percent from 1940 until 2016, reaching an all-time high of 118.90 percent in 1946—at the end of WWII-- and a record low of 31.70 percent in 1981.” This issue alone could encourage foreign savers in Dollar to look for a more stable reserve currency like the Euro with a current ratio that according to Eurostat, the European Union decreased from 84.9 per cent of GDP in 2015 to 83.5 per cent last year.

Does the IMF want every country to have a flat trade balance?

In economics when a country imports more than it exports, it has a "trade deficit." As a result, trade deficits can cause foreign exchange reserve shortages. Without foreign exchange reserves, businesses and governments can't meet financial obligations they owe other countries. A balance of payment problem hurts both the country with the trade deficit and the other countries it trades with.

The dollar, as reserve currency, can develop increase in demand if the Federal Reserve doesn’t increase the supply driving the price of dollars in the exchanges to go up. In this case U.S. goods are now more expensive compared to foreign goods, which reduces demand for U.S. exports.

According to the International Monetary Fund (IMF) the currency most commonly held as a foreign exchange reserve is the U.S. dollar. It comprises nearly 62% of allocated reserves as of late 2012. Other currencies held in reserve are the euro, Japanese yen, Swiss franc and pound sterling. The dollar still is the most widely held reserve currency, but the euro is narrowing the gap as it has grown demand from less than an 18% share of allocated reserves, at the time it was introduced in 1999, to 24% at the end of 2011.

Reserve currency status isn't without its drawbacks. The Federal Reserve must constantly play a balancing act between current domestic economic politics and the realities of international financial markets. Budget deficits and large debt to GDP ratios have to be carefully managed. The United States reported a government debt equivalent to 106.10 percent of Gross Domestic Product in 2016. Historically, US Government Debt to GDP ratio in the United States has averaged 61.14 percent from 1940 until 2016, reaching an all-time high of 118.90 percent in 1946—at the end of WWII-- and a record low of 31.70 percent in 1981.

Monetary policy used by the Feds includes “quantitative easing” which really means printing more money to keep the supply high and interest rates low. The method is however a temporary solution until growth and capital gains return to the overall economy otherwise inflation can set in as the value of the dollar shrinks. Economic politics can nevertheless upset sound monetary policy such as the case of recent tax cut mounting to a trillion dollars Trump just sign into law. But a high debt to GDP ratio indicates that the US economy is printing an excessive amount of dollars into the world economy. This action has the effect of reducing the value of a county’s foreign reserves denominated in dollars as it will reduced the balance of trade sheet in its purchasing power by increasing debt obligations. The combination of low borrowing costs stemming from issuing a reserve currency may encourage free spending by both the public and private sectors which can easily result in asset bubbles bloating government debt. Tax cuts in the U.S., for example, led Chinese leaders to fear a weak dollar since that would erode the country's value of dollar-denominated debt which might prompt a Chinese dumping of dollars in favor of other reserve currency. In the recent past the U.S. was able to spend freely because the excess Chinese savings had to be invested somewhere, and that somewhere was in dollar back US government bonds.

One important thing the IMF does is to help member countries cope with foreign exchange shortages caused by balance of payments problems. Many a case, providing rescue packages so that a country can avoid a default on its balance of payments. This policy however is linked to the political climate in the debtor country in order to avoid putting funds in a waste basket.

The International Monetary Fund, founded in 1944, is a voluntary financial institution with an initial membership of 184 countries. Its charter is to stand-in among these countries with cooperative monetary policies to stabilize the exchange of one national currency for another thereby, encouraging international trade. The IMF offers a tool in which each member state can collaborate with one another to promote its domestic economic prosperity and that of the membership. The IMF maintains a wide-ranging database of statistics of economies of the world as a whole, which publicly shares. It also acts as a consulting partner at the request of a member state and extends technical assistance in financial, fiscal, and economic matters. It can assist a country on implementing reform financial policies and funds are made available until the reforms take effect. It follows that this assistance is to shorten the duration and lessen the degree of disequilibrium in the international balance of payments of its members.

Moreover, encourage cooperation by IMF members in eliminating restrictions on the exchange of currencies and the timely payment for goods and services. This has been a major factor in bringing about the economic miracle of the second half of the century. Success by IMF members in meeting the challenges of integrating developing countries into the world economy in the 1960′s and 1970′s. Additionally, resolving the debt crisis of the 1980′s, encouraging reform of the former Communist economies, responding to the crises of the 1990′s, and expanding the benefits of globalization. Taken as a whole, international cooperation has demonstrated that it is indispensable for prosperity in today’s economy.

The IMF encourages its members to be open and transparent about their economic policies, balance sheets and stock market trading. The view is that the better informed a member country is about economic conditions in other countries, the more efficiently they can achieve international trade and investments. As trade and economic activity increases, so does employment in both the exporting and importing country which should lead to higher standards of living and a reduction of global poverty.

The IMF also urges its member to have transparent politics, economic stability, honest government, and the rule of law. In a widely anticipated report ahead of the Davos meeting of the Group of 20 finance ministers, “the IMF outlined two taxes that the group should consider and warned that international harmonization would be critical to prevent regulatory arbitrage.” This is a practice where firms capitalize on loopholes of regulatory systems in order to circumvent unfavorable regulation. Opportunities for arbitrage may be accomplished by a variety of tactics, “including restructuring transactions, financial engineering and geographic relocation.”

What will happen if a country stops engaging in international trade?

“The Great Trade Collapse” was a consequence of the 2008 financial crisis and it happened while the world GDP dropped by 1%, but world trade dropped by 10%.This global trade collapse is not a common occurrence as it happened over almost all the countries in the world. The reasons given by the analysts is the sudden drop in almost a synchronized demand, supply, credit constraint and disruption in global chain values.

In order to place the importance of international trade on its proper perspective it is necessary to analyze its background and forming theories.

1. Mercantilism

According to http://www.encyclopedia.com, Thomas Mun (1571–1641), English writer on economics, was the third son of a substantial London family and is often referred to as the last of the early mercantilists. His grandfather was an officer of the mint and acquired a coat of arms, his uncle was also an officer of the mint, and his stepfather was a director of the newly formed East India Company. Nothing is known of his education, but it is presumed, since there were close links between the Indian and the Mediterranean trades, that he served his apprenticeship in the latter. In fact, he says in one of his books that he lived for some time in Italy. He became a prominent and rich member of the East India Company 16302. Absolute Advantage

2. TheWealth of Nations

According to www.britannica.com , Adam Smith 1723—1790 was born in Edinburgh, Scotland. Social philosopher and political economist is known primarily for a single work—An Inquiry into the Nature and Causes of the Wealth of Nations (1776), the first comprehensive system of political economy—Smith is more properly regarded as a social philosopher whose economic writings constitute only the capstone to an overarching view of political and social evolution. A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it If two countries specialize in production of different products (in which each has an absolute advantage) and trade with each other, both countries will have more of both products available to them for consumption

3. Comparative Advantage

According to www.britannica.com, David Ricardo, 1772—1823 was born in London, England, English economist who gave systematized, classical form to the rising science of economics in the 19th century. His laissez-faire doctrines were typified in his Iron Law of Wages, which stated that all attempts to improve the real income of workers were futile and that wages perforce remained near the subsistence level. David Ricardo pronounced that “ even if one country has an absolute advantage in producing two products over another country, trading with that other country will still yield more output for both countries than if the more efficient producer did everything for themselves.”

4. Factor endowments: The Heckscher-Ohlin Theory

According to this theory, “countries with plentiful natural resources will generally have a comparative advantage in products using those resources. Comparative advantage arises from differences in national factor endowments, such as land, labor, or capital, as opposed to Ricardo’s theory which stresses productivity.”

In 1953 Wassily Leontief advanced his Leontief Paradox. It theorized that since the U.S. has abundant capital compared to other nations, the country would export capital-intensive goods and import labor-intensive goods but data shows that this not the case. Therefore, Ricardo’s theory seemed to be more predictive. However, factor endowments--and controlling technological differences does yield a predictive model.

5. The Product Life-Cycle Theory

In the 1960′s, Raymond Vernon attempted to explain global trade patterns. When a new product is introduced in a country, as demand grows, demand also appears in other developed nations which give rise to exports. But as other developed nations begin to produce the same product the initial country has the incentive to set up production in those countries where cost of production is lower making this original country that introduced the product an importer of this product. The flaw with the theory is that not all products originate in the same country as several new products are introduced simultaneously to international trade.

6. New Trade Theory

In the 1970′s the success of economies of scale, increased trade and the variety of goods available to consumers while decreasing the average cost of those goods. This notion is that international trade benefits all nations even they do not differ in resource endowments or technology. Nobel Prize recipient Paul Krugman was the first to notice this trend and develop a new international trade theory based on economies of scale where giant corporations outsource some production to countries with lower cost endowments.

New trade theory is not at odds with Comparative Advantage, since it identifies first mover advantage as an important source of comparative advantage. The debate today is now centered on whether a government should provide subsidies to the endowments of production that can help grow domestic industries in such way that companies can gain first mover advantage.

After considering all the different factors which make international economics and trade work, it becomes obvious that should an individual country decide to jump ship from international trade world this country’s domestic economy will soon withered on the vine.

What were the locations of trade routes of Anasazis and Hohokam?

Alfonso Llanes, studied at Florida International University

Answered just now

Kim Suina, researcher and author where she worked as an editor at the New Mexico Historical Review writes that:

The Ancient Trade to Colonial Commerce was established by nomadic tribes that lived by hunting and fishing and when agriculture was developed “great civilizations" emerged and flourished. Trade linked the peoples of the valley of Mexico (Mexico City) with those tribes of the north through the exchange of products such as turquoise, obsidian, salt and feathers, so that by the year 1000, trade had spread from Mesoamerica to Rocky Mountains.

When the Spaniards arrived in today’s Mexico and learned about the silver mines in the north they establish the first of four routes to bring the riches of the new world back to Spain. The central route was called “The Royal Road of the Interior Land,” which was a harsh and dangerous path that run 1,600 miles from Mexico City to the royal Spanish town of Santa Fe from 1598 – 1882. During this period, the road brought new arrivals to settle the land and carried its crops, livestock and crafts to the markets of greater Mexico.

When the North American Trade Agreement was implemented on January 1, 2008 four corridors were established in the agreement one of which is the Central Western corridor where the ancient trade route was located and It has the second largest trade volume of all the North American corridors. The route connects Chihuahua in Mexico to Denver, Colorado, via El Paso TX, the point of entry of El Paso/Ciudad Juarez between Chihuahua and Texas, and Santa Teresa in New Mexico.

Indian trails covering the Camino Real linked the Aztec Empire and other Mesoamerican civilizations with Chihuahua in the north and the regional trade center at Paquimé, Casas Grandes. Coming from the south in central Mexico the trail trade included marine shells, parrots, macaws, and copper objects. Reverse trade of locally produced items such as turquoise, flints, serpentine, garnet and semiprecious stones as well as, pottery, salt, clays, pigments, and processed bison.

Kim Suina tells us that “many cultural groups have resided in New Mexico, northern Mexico, Arizona, and Colorado through time. All of these societies maintained well-developed agricultural traditions, and relied on comprehensive systems of trade to disperse goods. Anasazi, Mogollon, and Hohokam trade routes connected trade centers throughout the region. The ancestral Pueblo peoples, or the Anasazi as they are more commonly known, resided in the four corners area, with Chaco Canyon as perhaps one of the most important trade centers of their civilization. The Hohokam, a farming culture from southern Arizona irrigated the basins of the Salt and Gila Rivers, and the Mogollon culture, in west-central New Mexico and south-central Arizona, transmitted Mesoamerican agriculture, pottery, and other objects to groups further north like the Anasazi and the Hohokam.”

Kim Suina continues “Indigenous Southwest peoples did not have wheeled vehicles or pack animals like horses or donkeys but had never the less established significant trade routes. The people of Chaco Canyon built a network of roads with clearly demarcated borders. These roads ranged from eight to ten meters in width and adjusted to the treacherous topography, with stairways and ramps built into the roadway to maneuver over sandstone cliffs. These paths connected the various settlements of Chaco and extended to outlying communities miles away.”

Source of Map of “El Camino Real de Tierra Adentro” US National Park Service.

What would happen if President Trump terminates NAFTA? Will the government of Canada plan to deal with the end of NAFTA by finding markets other than the US work?

http://www.cbc.ca/news/politics/trudeau-plan-b-nafta-1.4511350

Alfonso Llanes, Political junkie

Answered just now

The analysis should begin with what can Trump legally do if he decides to terminate NAFTA? Can he impose a 35% tariff as he is threatening to do? He can sure try it, but the affected companies will certainly contest it. A legal challenge to a Trump tariff has a sure shot at prevailing in court as a tariff is meant to target countries, not a corporation which means that Trump must follow the rules of WTO.

When Trump first made those noises, Ford was the first company to complain after realizing that the most improbable election had just happened with the help from the Russians. Ford, as well as Toyota, are still planning to move small car production to Mexico while keeping the same jobs in the U.S., company CEO Mark Fields has said to news media. Moreover, a withdrawal from NAFTA won’t allow Trump to automatically impose a 35 percent tariff, either, according to Fields

For instance, duties on goods produced in Mexico would only rise to the rate for countries with “most favored nation” status in the U.S.: about 4 percent in line with WTO rules. However, Trump could impose 15 percent duties for 100 days on GM’s cars, claiming a “balance payments emergency,” but that would fall short of the punishment he has threatened. Other tariff methods, such as anti-dumping duties, require special and lengthy procedures to enact. In short, Trump’s effort to follow through on his threatening trade tariffs is just hot air.

No matter the outcome is of domestic legal battles, should Trump decide to follow through and actually withdraws from US trade agreements, or if he imposes high tariffs, even as a threat or tactical maneuver. The likely result is that other countries will soon retaliate and will not wait for US court proceedings or litigation in the World Trade Organization to vindicate their claim under the agreement. Inmensurable economic damage will necessarily follow to US firms, workers, and probably will start a trade war long before the legal battle space is cleared.

Trump 35 percent tax is obnoxiously trying to regulate how companies conduct business, focusing on companies that shift production out of the U.S. and then sell back into the US market. Regardless of Trump’s trade rhetoric the focus should be on the impact NAFTA has on the economy despite his authority to terminate the agreement. Notwithstanding, business should have a strategic plan for failed negotiations as the Canadian and Mexican government officials rebuked the United States administration for its intransigence and for failing to undertake a modernization of NAFTA.

Canada for one has a new Comprehensive Economic and Trade Agreement (CETA) with the EU. Recently, Canadian Foreign Affairs Minister Chrystia Freeland was quoted as saying that the mindset of the U.S. negotiators was not to improve on NAFTA “ but on a negotiation where one party takes a winner-takes-all approach is a negotiation that may find some difficulties in reaching a conclusion U.S. was “…asking two countries to give up some privileges that they have enjoyed for 22 years, and we’re not in a position to offer anything in return, so that’s a tough sell.” Several U.S. proposals have been termed “poison pills” by its NAFTA partners, that eventually could derail the negotiations, and which certainly create conditions for a very difficult and contentious end to the fourth round and fifth rounds.

The round talks include:

• “A “sunset clause” so that NAFTA will automatically expire in five years, unless it is reviewed and extended which would cause a never-ending negotiation process within NAFTA.
• To eliminate Chapter 19 bi-national dispute settlement process for review of anti-dumping and countervailing duty findings.
• An “opt in” application of Chapter 20 of government-to-government dispute resolution concerning the interpretation and application of NAFTA.
• Reduce the ability of Canadian and Mexican businesses to participate in the U.S. government procurement market based on reciprocal monetary limits, instead of further liberalizing this sector.
• Impose a new 50% U.S. value content requirement for automotive goods and a significantly higher NAFTA content requirement of 85% (up from the current 60-62.5%, depending on the type of vehicle) and in the case of Canada, a challenge to its continuation of supply managed system for dairy, poultry and eggs. “

Under Nafta, tariffs were essentially reduced to zero among the three countries. Without NAFTA, tariffs would revert to levels agreed under the World Trade Organization treaty. Under NAFTA, supply chains have facilitated manufacturers with the ability to buy and produce wherever it makes the most business sense but that flexibility and savings would be lost out of NAFTA.

Some of the negotiators on the Canadian side have manifested that they are not clear about what the continuously changing and temperamental Trump is trying to accomplish other than perhaps bullying the parties to provoke Canada or Mexico to abandon the deal or make unsavory domestic trade concessions. Others think that Trump is just trying to please his supporters but the reality is that theatrics is actually obstructing tangible negotiations for the benefit of their peoples.

What is the best risk reward ratio in forex?

There is no best ratio as the choice is personal but in general 1:2 is a commonly used ratio. The issue is how much money is the trader willing to risk? A 1:2 Risk/Reward ratio maximizes profits on winning trades, while limiting losses when a trade moves against. By risking 50 pips to make a reward of 100 pips is effectively inverting these statistics favorably. In other words, have one winning trade for any two given loses to be break even.

For instance:

Win 40% of the time and a 1:2 risk reward ratio on 20 trades

12 losses at $100 loss per trade and 8 wins at $200 profit per trade.

Net result: +$400 (net profit)

Terms such as “pips,” “pipettes,” and “lots” are commonly used by Forex traders which need to be explained.

Definition of a Pip

The unit of measurement to express the change in value between two currencies is abbreviated pip and is a change in percentage points. If EUR/USD moves from 1.1050 to 1.1051, that .0001 USD rise in value is ONE PIP.

Most pairs go out to 4 decimal places, but there are some exceptions like Japanese Yen pairs that go out to two decimal places.

Definition of a Pipette

There are brokers that quote currency pairs beyond the standard 4 and 2 decimal places to 5 and 3 decimal places. These are quotations in Fractional Pips or “pipettes. For instance if GBP/USD moves from 1.30542 to 1.30543, that .00001 USD move higher is ONE PIPETTE at 5 decimal places.

Calculating the Value of a Pip

As each currency has its own relative value, it’s necessary to calculate the value of a pip for that particular currency pair.

Here is a quote with 4 decimal places. Exchange rates are expressed as a ratio (i.e., EUR/USD at 1.2500 written as “1 EUR / 1.2500 USD”)

USD/CAD = 1.0200. US Dollar/Canadian Dollar expressed as 1 USD/1.0200 CAD

Calculation the value change in counter currency times the exchange rate ratio = pip value in terms of the base currency [.0001 CAD] x [1 USD/1.0200 CAD]

OR

[(.0001 CAD) / (1.0200 CAD)] x 1 USD = 0.00009804 USD per unit traded. In this case if 10,000 units of USD/CAD, are traded a one pip change to the exchange rate would be approximately a 0.98 USD change in the position value (10,000 units x 0.0000984 USD/unit).

Now, the question is how to figure out the pip value of this position-- transfer to the pip value of the account currency.

This means that the pip value will have to be translated to whatever currency the account may be traded in. This calculation is multiply/divide the “found pip value” by the exchange rate of the account currency and the currency in question.

The USD/CAD example above, the pip value of .98 USD needs to be transfer to New Zealand Dollars account currency.

0.98 USD per pip X (1 NZD/.7900 USD)

Or

[(0.98 USD) / (.7900 USD)] x (1 NZD) = 1.2405 NZD per pip move

For every .0001 pip move in USD/CAD from the example above, a 10,000 unit position changes in value by approximately 1.24 NZD.

How do you price products?

Pricing a product has more than one answer because it depends on many economic and market variables and a short cut is bench marking. This is a difference maker in many organizations for understanding the range of performance levels that are possible in performing similar activities. Moreover, organizations will want to understand the characteristics or drivers of their own and others’ performance in the same market. This practice is over time used to improve a company’s performance by facilitating tactical or strategic modifications.

The Gross Margin Formula is a common way of pricing and is simply gross profit divided by revenue.

For example, if you own a candy store and buy a box of candies from your vendor for $10, and then sell it to customers for $20, then your gross profit is $10.

You can then divide your gross profit by your revenue ($10 / $20 = 0.50 or 50%). Your gross margin is 50% and you will keep 50 cents of every dollar for other business expenses and/or profit. This equation may seem simple but the meaning behind the percentage is substantial.

One prime use is a measure a company’s efficiency

Gross margin is a worthy metric of company health and efficiency, especially when comparing year-to-year operation. In case gross margin drops considerably from the previous year a reevaluation of costs and revenue becomes necessary in order to determine what the reason for the drop in revenue or an increase in cost is.

Benchmarking against others in the same industry

Comparing gross profit margin with others in an industry can be used to determine how a particular company is doing up against the competition. If trailing behind, a better method to increase margins is certainly needed on either the revenue or cost side of the equation:

Lowering wholesale cost if observed that other companies in the same industry have higher margins. This it could be because they are able to produce the same product at a lower cost. Looking for less expensive vendors or production methods can influence manufacturing costs.

Increasing revenue by increasing the retail price of a product would bring higher revenue per unit sale. However, if the markups are too high, then people will be less inclined to buy the same product for a higher price,so, mark up calculation comes into play.

Finding the right price spot for markups can be difficult. If price-products are too high, people will not buy but if the price is too low, then there will not be enough revenue to cover costs.

Statistics of Industry Benchmarks

In order to be precise with price markup, it’s necessary to study what others in the same industry are charging. In today’s market digital age consumers can instantly compare prices among multiple similar companies.

National Association of convenience stores (NACS)

“The NACS State of the Industry (SOI) Annual Report is based on data submitted by actual retail companies participating in the NACS SOI Survey.” This publication has been available since 1972, and the report provides data in the critical categories of finance, store operations, merchandising and fuel sales. “The data also analyzes comparative performance based on store operating profit, which allows retailers to benchmark and improve their own operations by considering the drivers of significant performance metrics.”

​According to the 2012 report,” the U.S. convenience store industry had sales of $700.3 billion, with merchandise contributing to 19% of sales. The total gross margin contribution of merchandise was 40%.”

Also included in the report is gross margin percentage, average gross margin% per store for various categories. Below is a review of the NACS Category Definitions and Numbering Guide, which was developed by the NACS Research Committee.

Category Markup	Percentage
Cigarettes	17%
Other Tobacco	44%
Packaged Beverages(non alcoholic)	65%
Beer	23%
Wine	36%
Liquor	31%
Edible Grocery	31%
Non-edible Grocery	73%
Perishable Grocery	53%
Frozen Foods	77%
Packaged Ice Cream/ Novelties	66%
Candy	85%
Salty Snacks	90%
Packaged Sweet Snacks	62%
Alternative Snacks	50%
Fluid Milk Product	42%
Other Dairy and Deli	66%
Packaged Bread	40%
Health & Beauty Care	106%
General Merchandise	65%
Automotive Products	83%
Publications	27%
Ice	286%
AVERAGE	66%
Food Service
Food Prepared On-Site	121%
Commissary/ Packaged Sandwiches	58%
Hot Dispensed Beverages	154%
Cold Dispensed Beverages	107%
Frozen Dispensed Beverages	111%
AVERAGE	110%
Source: NACS State of the Industry Annual Report 2012 Data