This morning UK, First Quarter GDP figure was pretty awful, showing that GDP contracted by 1.9%. That compared with 1.6% in 2008 Q4, and a forecast of a fall of 1.5%. Even so the markets didn't bat an eyelid, suggesting that such bad news is already baked into market prices. Moreover, GDP figures are like looking in the rearview mirror they tell you what's happened not what is ahead. On that basis the view out of the windscreen has been somewhat better. Recent UK PMI (purchasing Manager's Index) figures have been better than expected, and there has been some improvement in sentiment in manufacturing etc, including in this week's survey from the CBI. Also more forward looking, the March Retail Sales figures showed a continued rise.
In contrast, markets did rise this morning after the German IFO data was released, which showed a strong rise in business sentiments, and the strongest figures for five months. Korea also had figures out showing it had avoided going into recession. Latest, figures show China continuing to grow strongly, with a number of banks and financial institutions increasing their optimistic view for its economy. Latest estimates suggest that China will blow past Japan in the next two years to become the world's second biggest economy, and forecasts suggest that it will overtake the US within the next 20 years.
Already China is buying more cars than the US, and in preparation for a reduced role for the dollar it has been announced that China has doubled its reserves of Gold since 2003, and is about to engage on a further round of purchases.
2 comments:
I think you have been right all along, Boffy, and that this downturn is not going to be as deep as so many people have predicted. Over Christmas, commentators stated that we were in a period of 'phoney war' and that, come the New Year, a raft of big-name high-street retailers were going to collapse like a deck of cards. They didn't.
I think it is going to be "deep" - in fact it already is deep in terms of the percentage reduction in output, but I do not think it will be protracted. That is the real difference between now and the 1920's-30's, and the 1970's-80's-90's.
That is why you haven't seen all of those big name High Street stores close. Woollies had been reall struggling for years, nothing to do with the recession. Its also why you see some of the ones who did go, get their stores rapidly bought up by other stores!!! I was looking the other day at some of the Companies that do High Street shopfitting, and their share prices are rising quite smartly, because they are getting work from refitting some of these shops for the new owners.
Some companies, particularly smaller ones have been hit, because of the stoppage of credit, but that seems to be beginning to end, and in anyc ase soem of the bigger comapnies didn't have the problem in the first place. Its even coming out that some of the US Banks didn't need money from the Government, but were told they had to have it anyway!!! Now, we see that not only has Northern Rock paid back two thirds of the money it borrowed, but its now looking to icnrease its mortgage lending by 60%!
As I said last year, another shoe could drop. If Credit Card debt begins to default, for example, then the Credit Crunch could resume, and all bets would be off. That now seems unlikely to me, because that in turn would require a big rise in unemployment.
I think, as I've said in my latest blog, that the next thing will be the inflation that governments will use to liquidate all of this debt, and that will mean a different strategy for the left to adopt to the one it is talking about at the moment based on the idea of a serious, prolonged recession and drastic spending cuts.
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