Echo

Weekly world economic update: March 12- 18

Thursday, March 19, 2009

This week, big economic indicators were released around the world. The recent U.S. indicators - retail sales, housing starts, and inflation - offered dim glimmers of economic hope. Unfortunately, though, the bigger picture is one of a continued precipitous decline in global economic conditions, with some ever-so-slight signs of relief. Let's see, using global economic reports over the last week: March 12- 18.

UNEMPLOYMENT RATE: SURGING IN EVERY CORNER OF THE WORLD

INDUSTRIAL PRODUCTION: CLIFF DIVING

IMPORTS: CANADA AND THE U.S. ARE CLOSE TRADING PARTNERS WHO CAN'T HELP EACH OTHER OUT

  • Both countries have announced fiscal spending and tax cuts to counter the decline in aggregate demand (see Canada's fiscal stimulus package here and we all know about the U.S. stimulus package). Trade is not going to get any country out of the recession this time. Unless, of course, they simply wait for the U.S. economy to turn around.
RETAIL SALES: DEMAND IS LIKEWISE ANEMIC AROUND THE WORLD

INFLATION: THE STALL IN AGGREGATE DEMAND PUSHES INFLATION DOWN

  • In this economic environment, disinflation (falling inflation rates) is inevitable. It is a simple adjustment process to ensure that demand (falling) eats up supply. At least in the U.S., deflation has yet to bite the macroeconomy, but there is always that risk. The risk is that falling prices become embedded into consumer and firm expectations, resulting in mass defaults and a forceful consumption declines.
Hope this helps to see the broader economic picture. Rebecca Wilder

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