Wednesday, April 15, 2009

World economic reports (April 8-15): some hope, but still shockingly bad

Every Wednesday or Thursday, I present the latest week's global economic reports to get a feel for world economic trends. This week's reports bring news of continued economic decline in key economies, i.e., Germany, and perhaps slight glimmers of hope for others, Malaysia. There is no spinning the message, though, no strong trends of recovery have emerged. Some highlights are:
  • Annual import demand slumps. China's February report on annual import growth has not been totally rescinded.
  • Inflation trends continue downward, except in Norway, whose annual inflation rate remains unchanged.
  • Industrial production is a serious impediment to growth and jobs. Germany's industrial sector maintains its rapid decline, driven by stalled global trade.
Import slump is growing.

The chart illustrates import growth over the year through February 2009 for Germany, the U.S., and Canada and through March 2009 for China. Germany, the U.S., and Canada all marked new lows in import growth, falling in the range of 30% over the year (all levels are measured in $US). China's imports could not mimic the huge rebound that occurred in February, although the annual decline did not worsen too much, -25.1%. If the Chinese economy heats up a bit on massive stimulus, this would be good news for the rest of Asia, especially Japan.

Slack import demand signals anemic aggregate demand, which is dragging down prices around the world, especially those on energy and food.

The chart illustrates inflation in February and March of 2009 across France, Norway, Germany, and Sweden. Slack aggregate demand is dragging down inflation rates (disinflation). At least in the U.S., inflation is still an energy story; but eventually, the huge economic slack will drag down core prices, too.

Just out: the Bureau of Labor Statistics released its report on U.S. consumer price, which is still a mostly-energy story:
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in March, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The index has decreased 0.4 percent over the last year, the first 12 month decline since August 1955. On a seasonally adjusted basis, the CPI-U decreased 0.1 percent in March after rising 0.4 percent in February.
Industrial production in Malaysia improves slightly over the year, while that in Germany falls to new lows.

The chart illustrates annual industrial production growth in Malaysia, India, and Germany through February 2009. Germany's export sector is suffering and pulling industrial production down with it. No wonder Berlin-based DIW economic think tank forecasts that the German economy will contract by a massive 4.9% in 2009.

Unfortunately, the worst is yet to come. Unemployment continues its relentless surge.

The chart illustrates the unemployment rates in March of 2007, 2008, and 2009 across South Korea, Canada, Switzerland, and Australia. Clearly, the labor markets have taken a significant turn for the worse across the four economies. Although some seem to be falling faster (Switzerland, Canada, and Australia) than others (South Korea), there is likely more job loss in the pipeline.

Rebecca Wilder

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