All things considered, the auto industry as a whole is performing reasonably well this year. Volumes are up and we’ll likely continue to see vehicle makers and suppliers posting good second quarter numbers over the next few weeks.
China is slowing, but it’s a slowdown coming off a high base and it’s a slowdown that is needed in the interests of economic stability. Russia is strongly up this year. India is up, too. Europe may be ‘two speed’ but Germany’s economy has been very strong. The underlying situation in North America can perhaps be described as one of continuing gradual improvement. The supply-chain disruption caused by the March 11 earthquake and tsunami in Japan is slowly but surely being overcome.
There are some pretty big concerns in the background though. One is the situation in the US with the possible US government debt default. Another is the fragile state of the European economy and the pressures at work that threaten financial stability in the eurozone. There is a need for the relevant authorities and key actors to steer a course through these potentially dangerous waters to ensure the global economy doesn’t receive a sizeable negative shock. A broader financial crisis is not out of the question. We also need the price of oil to stay stable.
After looking unexpectedly strong in the spring, the economic recovery has had a fragile feel about it lately. The latest US economic data hasn’t lived up to the upbeat promise suggested earlier in the year. Interest rates are still on the floor here in Britain, despite an uptick in inflation, such are the concerns over the strength of underlying demand in the economy. Household incomes are falling in real terms and house prices are going down again. With the base rate at 0.5%, if the economic situation deteriorates there isn’t room for big interest rate cuts as there was a few years ago. And government finances are not exactly in good shape, so support from government spending isn’t really an option either.
The overall situation isn’t too bad given where things were a few years ago, but keeping the global economic recovery on track and avoiding financial instability is perhaps more important than ever right now.