Tuesday, November 08, 2011
NFIB - The Swedish Movie
So here it is - the Small Business Survey by Ingmar Bergman. Someone just broke a clock. Look at the symbolism:
First, five months in the double digit negatives for general business conditions outlook is a clock museum on fire.
Second, it's October. Note that in October 2008 the outlook was better. October should be relatively good in this survey. Any negative number in October is cause for deep concern - a double digit negative is cause for panic.
The dark shading indicates that October was a large sample month, as was July. Large sample months in negative double digits say something really bad about the future of the economy. Admittedly the Jan/Apr/Jul sequence for 2008 was worse, but not by much, especially since we may have the seventh month yet to come.
Because this is a relative, not an absolute scale, it presages significant moves in the US economy by at least six months. It's hard to look at this and not see a very, very bad Q1 2012. What's causing this is sales - sales expectations have been worsening since February (see page 9 in the report), and actual sales changes have been trending slowly negative since June.
I would strap in. There are too many variables to predict what will happen next year, but next year is going to be quite negative across much of the globe, and although right now US stats don't look that bad in comparison to other regions, it seems clear that they are due to take a turn for the worse quite shortly.
The Girl Who Played with the FIRE Economy
Government cannot, in aggregate, fuel growth in the US. The charitable/NGO sector is going to have to retrench.
Compared to an economy like Germany's, the US economy is much less sensitive to overseas contractions. But the problems in the Eurozone, which is very large, are going to have a worldwide impact. Canada's economy is pretty sensitive to the overseas economy, and in October there was a clear impact.
Right now the Euro crisis is whacking India's economy and hurting China's economy. This will slowly boomerang back and forth across the globe, probably building momentum for some time.
India's trade deficit is rising, and the fiscal problems in India are going to deliver another round in 2013/2014.
It's somewhat heard to pick a clear endpoint on this one. I expect this to be perhaps a five year process, with the imbalances in China and India reaching their peaks after the Eurocrisis peaks and starts to consolidate.
And then, once that happens, the US is going to have to face its own fiscal crisis by 2014. It is possible that the US will start its consolidation process while China is still madly keeping its bubble in the air - but if so, it still takes out China.
And India's fiscal balance is really bad now - they are going to have to do something. I think they will continue to grow, but they will have to buckle down and change a lot.
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