Blog: Uncertain times
Dave Leggett | 17 October 2011
The global economic picture continues to be dominated by major uncertainties and the longer those uncertainties persist, the greater the tendency for a degree of self-fulfilment regarding talk of lower growth prospects. Firms opt for prudence and start to rein in their investment plans, consumers start to retrench on their purchases. And lo and behold, economic growth forecasts get revised down.
On the plus side, the Chinese vehicle market just posted 8% growth in September. That's not bad and the final quarter is likely to be high as firms ratchet up the incentives. Next year is, well, more uncertain. From a global perspective, we certainly need the Chinese consumers to carry on spending. With Western households and economies increasingly stuck in low gear, momentum from other parts of the world will become even more important over the next few years. But even the Chinese are subject to global interdependencies. If demand for their exports to Europe and North America slumps, the Chinese economy will take a hit – less than it would have been a few years ago before domestic demand went mad, but a hit there will be.
A number of conversations I had with analysts last week confirmed the difficulties for the forecasters at present. Prospects for 2012 are heavily dependent on where the eurozone crisis goes and how the sluggish US economy shapes up. Confidence has ebbed lately, but it could come back if investors conclude that things really aren't all that bad after all, that the worst-case scenarios have really been headed off at the pass and that policy-makers do, after all, have a clue.
In the case of the US vehicle market, current assumptions appear to be that there will likely be some growth next year unless the economic situation deteriorates severely. It is, however, harder to see growth in the European car market under any circumstances. And the premium makers – who have enjoyed a very good 2010 and 2011 on the back of soaring demand around the world - are probably going to have to endure tougher conditions.
Our ASEAN correspondent, Tony Pugliese, is currently working on a management briefing looking at the auto industry and market developments there. It has been a pretty positive story generally in recent years. Prospects for Thailand, for example, have looked pretty upbeat as its market has grown along with auto industry investment that builds on its position as a global pickup specialist and regional powerhouse. Helpfully, the recent political instability appears to have quietened down following elections. But there's one thing you can't legislate for in your business planning. The country is experiencing the worst flooding in fifty years. You see it on the news and think, 'bit of a monsoon, that' but it's difficult to know how serious it really is and what the full impact will be. As deputy editor Graeme Roberts notes though, it's another natural disaster that the autobiz does not need.
As ever, interesting times...
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