Are we talking ourselves into recession? If we are, then perhaps the media reporting of all the bad economic news plays a role, but it’s a supporting – not a lead – role, at most. And the media has a duty to report on what is happening.
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It is hardly our fault that all the news is bad at present and it would be remiss of us to paint an optimistic but untrue picture of events.
The causes of this unprecedented global economic crisis lay in a poisonous mix of complacent governments, laid back regulators, pumped up bankers and credit-bingeing individuals who over-burdened themselves with debt.
But that’s not to say there aren’t some corners of the press who are positively revelling in the situation. A senior minister here in the UK, for example, was shot down by members of the press recently for suggesting she saw some ‘green shoots’ of recovery – as if she was somehow irresponsible for trying to sow some seeds of hope.
In the end, figures out today suggest she may not have been completely wide of the mark.
So, make what you will of a new weekly column in the US publication Forbes called The Weekly Layoff Report. Almost 90,000 layoffs were announced at America’s largest public companies last week and Forbes is keeping track.
Things are hardly better here in the UK but most worrying of all has been the sharp decline of the Chinese economy, where a staggering 20 million migrant workers have lost their jobs because of the nation’s economic slowdown.
Western OEMs and suppliers who have looked east and invested in China will have to brace for slower sales and a lower return on investment. Overcapacity could quickly feed into a price war.
There will have been nervous looks towards Beijing in recent months as China, as one observer put it, regressed “from presumptive superpower-in-the-making to panicky emerging market”.
And the support looked for from emerging markets generally, to help counteract dissipating sales in Europe and North America has almost vanished.
It was assumed that China’s export machine would keep driving economic growth there. But customers for Chinese goods in the West have reined in their spending. In November, China’s exports fell for the first time in seven years. The country’s imports, meanwhile, fell 17%, whilst car sales fell 15% year on year.
In a country not known for candour from its State officials, the minister of industry said the country had a “serious problem” and was under “a lot of pressure”.
There are signs things may get worse, China’s exports fell by the most since 1999 in December and economic growth cooled to 6.8% in the fourth quarter, the weakest pace in seven years.
That sort of growth may seem like a stellar achievement compared to the contractions seen in the West, but it is estimated that China needs to achieve growth of 8% just to keep its ever-expanding population in employment.
One analyst has said he believe there is a 30% chance of an outright recession in China and a 70% chance of the economy growing between zero and 4% in 2009.
China is not alone, falling export demand is hammering economies across Asia Pacific, with South Korea’s exports plummeting by a third in January.
The evidence suggests that conditions will remain treacherous for the foreseeable future.
But is it all bad? Is there no good or hopeful news on the economic front?
There is hope today, amongst all the seemingly depressing figures, with some signs the Chinese government is having success in battling recession with an economic stimulus package.
“According to economic figures for December, the domestic stimulus policies have achieved initial results,” central bank governor Zhou Xiaochuan was quoted in local press saying.
Data out today shows that China’s official purchasing managers’ index for January rose to 45.3, up from 41.2 in December and a record low of 38.8 reached in November. A sub-50 reading still indicates that manufacturing is contracting. But, it may show that the economy is bottoming out.
What is more, there were hints of at least hitting bottom in the eurozone too, with its services Purchasing Managers’ Index up to 42.2 in January from 42.1 in December. Yes, the service industries fell again in Germany and Spain but the falls slowed markedly in France and Italy. Moreover, the steep contraction in the euro area’s manufacturing sector also eased slightly in January.
The green shoots are small and may yet get trampled on by events, but at least you heard some good news here first. And we realise there’s still a big hole for this industry to climb out of. But whatever happens, don’t shoot the messenger.
