macro economic update The US, Euro-zone and UK economies all recorded declines of around 1.5% in their GDP in the December quarter. The US and the UK experienced reduced domestic spending, while the Euro-zone has been adversely impacted by falling export markets. Similarly, Japanese exports, down 45.7% over the year to January 2009, pushed the economy sharply backwards, down 3.3% in the December quarter alone. The Japanese economy appears to be in a depression. The extent of the fall in Japanese exports and industrial output at the end of 2008 was significant. Domestic demand has been weak in Japan for years and the economy has been reliant on exports. Economic conditions have deteriorated across the United States in the first months of this year, leaving few industries untouched. Consumer spending has remained weak, housing is in the doldrums and demand for commercial, industrial and retail space contracted at a faster rate than previously. In manufacturing, there have been steep declines in some sectors and pronounced declines overall. Unemployment is continuing to rise – with reports that 697,000 jobs were lost in February 2009. This would lift the unemployment rate to 8%, from 7.6% at the end of January 2009. Economic growth in China slowed to 6.8% YoY in the December 2008 quarter, down from 9% YoY in the previous quarter. There has been a rise in reports of social disorder in the wake of massive layoffs in the east coast industrial sectors. Property and construction has been hit hard with falling house prices and reports of big reductions in building activity, accounting for a loss of jobs for rural migrants. In the Euro-zone, output started falling as early as the June 2008 quarter but the decline worsened in the December 2008 quarter when output declined by 1.5%. All of the big economies were hit, with Germany suffering a particularly severe 2.1% reduction in GDP in the December quarter, while Italian output fell by 1.8% and French by 1.2%. This is expected to be the worst economic decline in Western Europe since WWII, with a decline in real GDP of over 3% expected this year. The UK is in recession, having experienced two consecutive quarters of negative growth. The cumulative loss of output so far exceeds 2.0%. The decline in output is broadly based, with activity falling right across the private sector. There have been sharp declines in business investment and consumer spending is also falling. Unemployment is rising. Sources: NAB Capital Australian Markets Monthly – “A Monthly Outlook for Australia, Key Global Economies and Markets” – March 2009.
The Australian Financial Review, 6 March 2009. Page 18: “Outlook Black in Beige Book” Tony Walker |
