World Economy Shows New StrainEuropean Output Shrinks, U.S. Inflation Jumps;
Fresh Worries in Developing Nations
By JUSTIN LAHART in New York, ALISTAIR MACDONALD in London and MARCUS WALKER in Berlin
August 15, 2008; Page A1
The global economy -- which had long remainedresilient despite U.S. weakness -- is now slowing significantly, withEurope offering the latest evidence of trouble.
On Thursday, the European Union's statistics agencysaid gross domestic product in the euro zone contracted 0.2% in thesecond quarter, the equivalent of a 0.8% annual rate of decline. Itmarked the first time since the early 1990s that GDP has fallen overallin the 15 countries that use the euro.
In a fresh sign of the pressures facing the Americaneconomy, the Labor Department said Thursday that U.S. consumer-priceinflation hit a 17-year high in July, rising 5.6% from a year earlier.
 With the European growth report, four of the world'sfive biggest economies -- the U.S., the euro zone, Japan and the U.K.-- are now flirting with recession.
China, the world's fourth-largest economy, is stillexpanding strongly, as are India and other large developing economies.Still, weak growth elsewhere in the world is tempering the torrid risein prices of commodities such as oil, copper and corn, giving relief toconsumers from high gasoline and food costs and cutting manufacturers'raw-materials bills. U.S. benchmark crude on Thursday closed at$115.01, down roughly 20% from its July 3 peak of $145.29 a barrel.Easing inflation pressures could also make it easier for the world'scentral banks to lower rates in an attempt to fan flagging growth.
The global weakness marks a sharp reversal ofexpectations for many corporations and investors, who at the year'soutset had predicted that major economies would remain largelyinsulated from America's woes.
For the U.S., economic sluggishness abroad is both ablessing and a curse. Lower commodity prices are giving welcome relief.In addition, the dollar has strengthened as other economies lose steam-- which benefits U.S. consumers by cutting the cost, in dollar terms,of imports ranging from flatware to flat-screen TVs.
Yet at the same time, weaker foreign economies alsoundercut one of the few remaining bright spots in the U.S. economy:exports. Indeed, in a sign the world is dialing back its shopping spreeof the past few years, the Baltic Dry Index, a measure of demand forshipping services, has fallen 37% since hitting a record on May 20,including a stretch of 23-straight down days. Dollar strength couldalso hurt U.S. exports by making U.S.-made goods pricier abroad. Thedollar rose against the euro Thursday to levels unseen since February.
"Every region of the world except the Middle East andNorth Africa -- a beneficiary of high oil prices -- will experience aslowdown this year," Global Insight, a Massachusetts forecasting firm,said in a recent report. Deutsche Bank projects global growth of 3.7%in 2008 and 3.2% in 2009, the worst two-year stretch since 2002 and2003, when the world was coming out of recession.
Several factors are behind the worsening outlook. Inaddition to rising commodities prices, countries including Spain,Ireland and the U.K. are suffering from U.S.-style housing downturnsand a weakened banking sector. America's economic stagnation isweighing on other nations as well, because the U.S. remains the world'slargest importer and still accounts for more than a quarter of globaleconomic output.
Many parts of the world are struggling to containinflation. This is especially true in emerging markets, where inflationpressures are higher. From Mexico and Brazil to Romania, central banksare still raising interest rates. While that's a powerfulanti-inflation tool, it also tends to damp growth just as economiesshow fresh signs of tipping toward recession.
"The global economy is sputtering amidst a widening inthe slowdown from the United States to Western Europe and Japan," J.P.Morgan economist David Hensley said in a note to clients Wednesday.That slowdown, he said, "is feeding through to the emerging economies."
On Wednesday Japan reported its economy contracted atan annual rate of 2.4% in the April-June quarter, the largest declinein seven years.
The U.K. could be heading towards its first recessionin 15 years. Retail sales fell 0.9% in July from a year ago amongstores open at least a year. Manufacturing output is down 1.3% on theyear. Home prices are down nearly 9% from a year ago.
"The next year will be a difficult one, with inflationhigh and output broadly flat," Bank of England Governor Mervyn Kingsaid Wednesday. But he also predicted that inflation would begin toease next year, which market participants interpreted as a sign thatthe bank may be preparing to lower interest rates in response to aweakening economy.
In the U.S., an economic-stimulus package that brieflyboosted consumer spending has faded. Wednesday, the Commerce Departmentsaid retail sales fell 0.1% in July, the weakest showing in five months.
With most of the world's big economies struggling,booming emerging markets are feeling a pinch. Last week Taiwan saidJuly exports fell short of economists' expectations. A survey ofChinese purchasing managers indicated that manufacturing activitydeclined in July, the first time that's happened in the report'sthree-year history. On Thursday, Brazil said June retail sales advancedat their slowest pace in over a year.
Exports Soften
Exports also have taken a blow. Gary Goh, the exportmanager for Singapore-listed Lorenzo International Ltd., a sofa andhome-furnishing maker, says sales are softening. Exports within Asiahave begun to slow, although not nearly as much as to the U.S. andEurope. "It's a global problem," says Mr. Goh.
In Malaysia, an electronics-manufacturing base,economists project slowing export growth in this year's second half.High prices for commodities such as palm oil (a cooking product that'sa big Malaysian export) have propped up the country's export growthover the past year. But prices recently have come down sharply. As aresult, analysts have trimmed 2008 GDP-growth estimates to around 5.5%from as high as 6.3% earlier this year.
 U.S. firms are also seeing more trouble spots abroad.Starwood Hotels & Resorts Worldwide Inc. late last month loweredits earnings guidance for the rest of the year. "We are starting to seea few non-U.S. markets also being impacted...like London, Paris andTokyo," said Vasant Prabhu, the company's chief financial officer, in acall with analysts.
A prime example of the global slowdown is Britain,which is getting hit by a housing downturn, tighter credit and loftycommodity prices. In England and Wales, some 3,560 companies wereeither forced into liquidation or did so voluntarily during this year'ssecond quarter, a 15% increase form the year-earlier period, accordingto government figures.
Cains Beer Co., Liverpool, England, has seen revenuesat the 100 pubs it owns suffer as consumers cut spending. The cost ofmaking beer at the 150-year-old brewer increased as the price of hopsshot up. It also faced a 40% increase in the cost of aluminum for beercans over the past year or so.
With banks across the U.K. becoming more cautiousabout making loans, Cains's bank, the Bank of Scotland, said itwouldn't be offering any more credit on Aug. 7. Unable to borrow to payoff a large tax bill it owed, Cains put itself into "administration,"the process of selling off a company or its assets to pay debts.
"A year ago, two years ago, one bank said 'no,'" recalls Cains Chief Executive Sudarghara Dusanj, "another said 'yes.'"
A spokesman for Bank of Scotland's parent company, HBOS PLC, declined to comment.
Hunkering Down
British consumers are hunkering down. "The cost ofliving has rocketed," says Gareth Lucas, 34 years old. He works parttime at a hospital in Swansea, south Wales. With fuel costs so high,Mr. Lucas tries to fit more tasks into each car trip and no longertreats himself to cappuccino at a nearby café.
At night, to make extra cash, Mr. Lucas does gigs as astand-up comedian -- but increasingly he performs to smaller audiences."People just aren't going out anymore," he says.
In Continental Europe, the European Central Bank hasbeen more hawkish on inflation than the U.S. Federal Reserve. The ECBraised its key lending rate a quarter point to 4.25% in July. Beforethat, it had kept rates steady throughout the credit crisis that beganto unfold last summer -- even as the Fed cut its target rate deeply.Those higher interest rates, too, are weighing on Europe's economy.
For European exporters, the persistently high euro hasbeen an increasing burden since 2006, when it began to strengthen fromaround $1.20 to nearly $1.60 earlier this year. It has also gainedagainst the pound, the currency of the U.K., one of its major tradingpartners. The euro has fallen against the dollar, but still remainspainfully high for European exporters.
Exports from France, Italy and Spain were the first tosuffer, since many make consumer products such as household appliances,shoes and clothing that compete directly with goods made in Asia, wheremost currencies haven't risen as strongly against the dollar.
German exporters coped better until the past fewmonths, thanks to their greater specialization in goods such as machinetools and luxury cars, which are less price-sensitive than mass-marketconsumer goods. But car makers such as BMW AG and Daimler AG saythey're hurting in the U.S. market, partly because a generally weakdollar in recent years has made European cars costlier to Americanbuyers paying in dollars.
The past few months, German exports have started toslow markedly. The slowdown in global demand is more important than thehigh euro, many companies say.
"It can't be denied: Growth is clearly flattening,"says Karl Haeusgen, chief executive of Munich-based HAWE Hydraulik, amidsize company typical of Germany's large engineering industry. Salesof equipment to construction-related industries world-wide are fallingas a construction downturn grips countries on both sides of theAtlantic.
In Japan, manufacturers have been unable to pass theirhigher raw-material costs through to the prices they charge, shrinkingtheir profit margins. And because Japanese manufacturers import most oftheir raw materials, and export much of what they make, manufacturers'inability to pass on higher costs is weighing on the economy at large.
Japanese companies are seeing the global slowdown cutinto overseas sales. Manufacturing remains a much larger part ofJapan's economy than in the U.S. Last week, Toyota Motor Corp. saidprofits were 28% below their year-ago level in the quarter ended June30. North American sales have been weak since last year, but now thesluggishness is spreading: The car maker said it sold 9% fewer cars inEurope than it did a year earlier. |
发表于 2008-8-15 15:54:33
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