Bright spots seen in the world economy
One of the featured speakers at World Trade Week noted a few bright spots in the world economy last week, although he cautioned we probably won't be feeling really good again until 2011.
"We're still going down," just more slowly now, and unemployment is still on the increase, added Dietrich, senior analyst with the Institute for Trend Research, a Concord, N.H., economic analysis think tank.
Dietrich began his presentation with the comment that we are living "in an amazing time — living in history."
The recession is already probably the deepest and longest since World War II, he said. Industrial production around the world in the last two quarters was "slammed," and financial markets are in trouble. It is an "economic pandemic" with "massive recessions" going on simultaneously in the U.S., China, Japan and Europe.
Now everyone wants to know what else can go wrong, said Dietrich, and how are we going to fix it? And when will it be over?
He made a joke about former Secretary of Defense Donald Rumsfeld telling reporters a few years ago that "there are things we don't know we don't know," and how that pretty much sums up economic conditions around the world today.
Almost a year ago, he pointed out, there was a report that China and Germany were "uncoupled" from the unstable world economy, but now we know that wasn't true. Right now China's economy "seems to be stabilizing — but it's their data," he said. In fact, he said, nobody knows what China's economic growth really is, because the Chinese government provides the statistics.
Dietrich said he knows one individual very familiar with business in China who told him recently that "nothing is happening there." Inventory is piling up and much of the manufacturing has ground to a halt.
Dietrich said his organization follows several major indicators to evaluate economic conditions and "they're not saying this is really over."
Banks aren't lending, and the housing market crisis has not been resolved.
His forecast: The recession will continue into 2010 for most of the world's economy, when a mild recovery — "not accelerated" — will become evident. The emerging nations will lag far behind, and Europe will also lag somewhat. Eastern Europe, he said, is "essentially bankrupt" right now.
There are a few countries that appear to be in a better financial position than the rest of the world, those being Canada, Brazil and Australia, according to Dietrich. He said Brazil is "recovering" and he is very optimistic about that country because it has dealt well with the hyper inflation and debt that plagued it in previous years. It is also in close proximity to North American markets for its industrial output.
"We think (Brazil) has a bright future," said Dietrich, although he noted that country's stock market was "crushed" like the others around the world in recent months.
Dietrich was asked if the U.S. government's "stress test" of the health of 19 leading banks will indicate an improvement in the financial industry.
"I don't think the stress test will make any difference, because the feds already said they were not going to let any of them fail," replied Dietrich.
Both the U.S. and China will provide stimulus money in their countries to restart those economies. China is desperately trying to get its people "to buy stuff — anything," he said. The U.S. is doing the same, he noted, although the impact of stimulus funding here is only just now beginning to be felt.
Dietrich said he believes the concept of stimulus funding will make a difference because eventually that money will work its way through our economic system.
"Yes, there is going to be inflation down the road," said Dietrich, who encouraged his audience to begin now to take future inflation into account when making overseas business plans.
One thing can be said for certain, he said: The "shock and awe" of the worldwide recession is already passed. Everyone is resigned to the fact that it is really here and "no one is in denial," said Dietrich. With that mindset in place, the responses and necessary adjustments to it "are happening at an accelerated rate."
There are opportunities in the business world — in energy, pollution control, health care, transportation, power transmission, IT, communications, teaching/training, food production and more.
And the U.S. is still on top of the world economy, with 23.1 percent of the world's GDP, followed by Japan with 7.8 percent, China 6.8 percent, Germany 6.1 percent, France 4.8 percent, U.K. 4.5 percent, and Italy with 3.9 percent.