The global downturn has engendered a mood of doom and gloom across the business community, which, to a large extent, has been merited. What’s more, figures out today (4 February) suggest that China, a market that many were hoping would cope with the economic choppy waters, is also caught up in the storm. However, as Chris Brook-Carter explains, there is some evidence of some, small “green shoots” of recovery.
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I am losing count of the times I have sat and listened to friends and casual observers blaming the press for our rapid descent into economic turmoil here in the UK, and I suspect the same finger of blame is being pointed in other countries too.
Despite the evidence of economic mismanagement by governments, bankers and individuals who over-burdened themselves with debt, the story goes that the press has talked us into deeper woes by fixating on the doom and gloom.
This, of course, is rubbish. It is the duty of the press to report on what is happening. 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.
That is not to say that there are not some corners of the press who are not revelling in the situation. A senior minister, for example, here in the UK, was shot down by certain members of the press last month for suggesting she saw some “green shoots” of a recovery – as if she was somehow irresponsible for trying to sow some seeds of hope. In the end, figures out today (4 February) suggest she may not have been completely off the mark – but more of that later.
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So, take what you will of a new weekly column I saw in the US publication Forbes called The Weekly Layoff Report. Almost 90,000 layoffs were announced at the largest public companies in the US last week and Forbes is keeping track of any job cuts to come.
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.
Multinational food groups from Tyson Foods to Nestle and international retailers from Tesco to Wal-Mart have looked east for growth in the last decade and have been rightly proud of the expansion into China, which has helped prop up stagnating growth rates in some Western markets.
There will then have been nervous looks towards Beijing in recent months as China, as one observer put it, regressed “from presumptive super-power-in-the-making to panicky emerging market”.
It was assumed that China’s export machine would keep driving economic growth there. However, this belief has looked misplaced since November, when total exports (China’s driving force) fell for the first time in seven years. The country’s imports, meanwhile, fell 17%. Car sales tumbled 15% year-on-year.
In a country not known for candour from its state officials, China’s 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 report quoted an analyst saying he believed there was 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 in particular reporting horrible figures today showing that January shipments fell 32.8%.
The evidence suggests that conditions will remain treacherous for the foreseeable future. However, far be it of me to be pigeon holed as a doom mongerer. 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 as saying in the local press.
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 a silver lining 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 may be small and may yet get trampled on by events, but at least you heard the good news here first.
