.comment-link {margin-left:.6em;}
Visit Freedom's Zone Donate To Project Valour

Wednesday, March 11, 2009

A New World Of Hurt

It still seems to me that both IMF and World Bank 09 forecasts are too optimistic. Not that World Bank isn't forecasting world contraction this year, but still.... Look at these freight notes:

Zero growth forecast for Chinese terminals:
China's biggest terminal operator has predicted zero growth in container throughput in 2009 for the first time ever as demand peters out in the mainland's key export markets.
China Merchants (Holdings) Inter-national has a 34 percent share of the mainland container market, which company chairman Fu Yuning said would remain at 129 million TEUs this year.
"This is the first time in history it will remain unchanged over the previous year," Fu told delegates at the Transpacific Maritime conference in downtown Los Angeles.
Later on in the article the head of the LA Board of Harbor Commissioners is quoted as stating "
We are in a new world of hurt," and it is hard to disagree when one takes a sober look at the numbers.

China seems to be having some success with its internal spending program, but export orders are continuing to fall:
China's customs agency said Wednesday that merchandise exports in February plunged 25.7% from a year earlier. That is one of the biggest drops on record, and extends the 17.5% fall in January for a fourth straight monthly decline.

Imports declined by a slightly less dramatic 24.1%, thanks in part to government spending, which other data also issued Wednesday showed picking up in February.
So the internal spending isn't likely to help the region much overall.

Japan is in even worse shape:
Exports in January dropped a record 46.3% from a year earlier to 3.28 trillion yen, the fourth consecutive month of year-on-year declines, with exports to the US hardest hit, registering a 52.9% drop.

Car exports alone dropped 66.1%, with semiconductor and electronic parts exports down 52.8%.
Germany, another manufacturing powerhouse, is seeing truly epic drops in orders (January):
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. “The annual slump is absolutely catastrophic,” said Alexander Koch, an economist at UniCredit MIB in Munich. “The extent of declines is terrifying.”
Ex-European orders dropped 18.2%, and domestic demand is dropping heftily now. I included that last quote in case you all were thinking that I am a gloom-and-doomer.

Judging by January US wholesale inventories, we aren't going to be helping!!

Until that line declines, it's a safe bet that new orders will be declining. There's nothing worse than sitting on warehouses of stuff you aren't selling as your credit lines get stretched thin.

Global air freight for January:
The alarming 22.6 percent collapse in cargo markets in December worsened in January 2009 with a 23.2 percent year-on-year drop in freight demand, according to the International Air Traffic Association (IATA).
Asia Pacific carriers, representing 43 percent of the market, led the cargo decline with a 28.1 percent year-on-year drop. This was followed closely by the other major market players: European carriers (-23 percent) and North American carriers (-19.3 percent).
IATA is begging Obama to put money into airports and traffic control improvements. Instead they are going to get fuel price hikes and taxes on GHG engine outputs.

Russian railroads are improving their forecast for 2009. The new projection is for revenue to be down only 20% YoY. Maersk is increasing shipping rates in April, followed by a July increase, calling current rates unsustainable. We'll see.

India is doing relatively better, but IT profits will probably come down sharply this year. (Services have been carrying Indian GDP recently.) Tomorrow we get Indian industrial production. However the rupee's collapse is helping some sectors; apparel exports are now rising.

I think China will have to devalue.

And what of Japan? Japan has staggering public debt levels, a current account deficit, and collapsing exports as well as shrinking domestic demand. Japan has slowly moved a lot of new production overseas to countries like Indonesia, and Japan's current account surplus has been created by increasing levels of repatriated profits. But those profits are due to weaken for a while to come, as countries like the Phillippines, Malaysia, Singapore, and Indonesia start to really feel the impact of the global downturn. This worries me terribly, because Japan is the world's number 2 economy, and changes in Japan's economic relationship to other economies holds the potential to cause severe global disruption.

Brazil contracted 3.6% in Q4 08, although the signs of resurging commodity prices have helped boost their currency. However, the boom was coming to a natural subsidence last year already, January industrial output was down over 17%, and weakening trade with countries like Argentina is going to hit the ag sector. Venezuela is just a shambling disaster bent on a glorious suicide under Chavez, and Argentina is lurching along in a world of hurt.

Mexico is helped by the peso's decline, but that same decline is boosting inflation rapidly and cuts into real incomes, which is producing a fall in internal auto sales that exacerbates declining auto exports. Overall manufacturing isn't doing much better, with exports dropping 30% in January. The Mexican economy will not grow in 2009. It may shrink as much as 2.5% by my calculations, though I seem to be more pessimistic than most. Perhaps there is something I'm not seeing.

In light of all this, I nearly passed out when I read some of the spending increases folded into the Barbie Doll Congress' latest spending bill. It is nice to know that tattoo removal and Hawaiian welfare are still on Congress' horizon, but it does seem that overall economic reality hasn't managed to enter the chambers. Yet. An 8% increase in overall funding for most of the government seems a bit excessive under the circumstances, doesn't it? Especially since this comes on top of that 787 billion stimulus thingie of a month ago. If spending money like water could lift the US economy out of a recession, our economy would be booming.

Update: Congress just has to wake up, and it had better do so soon. Here is the trend in federal tax receipts:

This isn't going to change for the better very soon either, and it exposes the fantasy of the Obama budget proposal.

Comments: Post a Comment

Links to this post:

Create a Link

<< Home

This page is powered by Blogger. Isn't yours?