Thursday, 12 March 2009

Global confidence falls

Bloomberg reports that confidence in the world economy dropped in March.

The Bloomberg Professional Global Confidence Index fell to 5.95 this month from 8.5 in February. A reading below 50 means pessimists outnumber optimists. Sentiment about Europe and the U.S. slid, while respondents in Asia were less pessimistic about their region, the survey showed.

Recent data justify the pessimism.

In China, the spectre of deflation is rising as consumer prices fell 1.6 percent in February over the previous year. Meanwhile, Chinese exports dived in February, as Reuters reports:

Exports in February slid 25.7 percent from a year earlier, dwarfing forecasts of a 5.0 percent fall, while imports dropped 24.1 percent, close to projections of a 25.0 percent decline.

The resulting trade surplus was just $4.84 billion, a three-year low, compared with $39.1 billion in January and a record $40.1 billion in November, the customs administration said. Markets had expected a figure of $27.3 billion.

But investment spending may help offset some of the external weakness.

Investment in urban areas in fixed assets such as roads, power plants and apartment buildings rose 26.5 percent in January and February from a year earlier, easily beating market forecasts of a 21.5 percent increase.

Meanwhile, though, the outlook for capital investment in neighbouring Japan does not look rosy. Bloomberg reports:

Orders for Japanese machinery fell for a fourth month in January, the longest losing streak in at least 20 years, as exports crashed and profits evaporated.

Bookings, an indicator of capital investment in the next three to six months, declined 3.2 percent from December, the Cabinet Office said today in Tokyo. The median estimate of economists surveyed was for a 4.8 percent drop.

And Japan also faces a deflation threat.

Producer prices, the costs companies pay for energy and raw materials, sank 1.1 percent in February from a year earlier, the biggest drop in more than five years, a central bank report today showed.

The other export powerhouse, Germany, also faces falling orders in manufacturing. From Bloomberg:

German manufacturing orders collapsed in January as the global recession smothered exports.

Orders plunged 38 percent from a year earlier, the biggest drop since data for a reunified Germany started in 1991, the Economy Ministry in Berlin said today. From December they fell 8 percent, four times as much as economists expected and extending their worst decline on record.

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