Global Economy - A Gloomy Outlook for 2009
New Jobs creation as well as retention of existing jobs are linked directly with the economy. 2009 is a bad year in general.
2009 looks a bad year for the global economy. I was reading in the latest issue of Newsweek about the happenings in Davos. The Newsweek correspondent was trying to find at least one senior management person ( from the illustrious crowd who had gathered at Davos ) who was optimistic about 2009.
The quick and dirty survey could not reveal even one, although he did meet a few Indian industrialists there.
Combine this with the following facts about the world’s largest economy ( Courtesy Bloomberg ) :
Sales at U.S. retailers probably fell in January for a seventh straight month as surging unemployment hobbled consumers, economists said a report this week will show.
Purchases fell 0.8 percent, capping the longest slide since comparable records began in 1992, according to the median estimate in a Bloomberg News survey. Other reports may show falling oil prices helped narrow the trade gap and prevented consumer confidence from sinking further.
Household spending is likely to keep shrinking as job losses mount, home prices skid and banks limit lending. President Barack Obama is seeking to push a $900 billion stimulus package through Congress this month to jump-start the economy over objections by some lawmakers that the plan is too focused on spending and will bloat the government deficit.
“Consumers are still shell-shocked,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina. “Folks just aren’t spending right now.”
Retailers are bracing for the first annual drop in sales this year in at least 14 years, according to the National Retail Federation. January same-store sales dropped 1.6 percent from a year ago, the International Council of Shopping Centers reported last week.
The unemployment rate jumped to 7.6 percent in January, the highest level since 1992, the Labor Department said last week. Payrolls plunged by 598,000, bringing the total number of jobs lost over the last 13 months to 3.6 million, the biggest slump in the postwar period.
Consumer Slump
Consumer spending is set to contract again in the current quarter, economists forecast, after falling in the second half of 2008. Purchases haven’t decreased for three consecutive quarters since records began in 1947.
The Commerce Department’s retail sales report is due Feb. 12. The estimated decline would follow a 2.7 percent drop in December. Excluding automobiles, sales decreased 0.4 percent in January after falling 3.1 percent the prior month, according to the survey median.
The world’s largest economy may contract at about a 5.5 percent annual pace this quarter after declining at a 3.8 percent rate in the last three months of 2008, according to a forecast by economists at Morgan Stanley in New York. Last quarter’s drop was the biggest since 1982.
Demand for expensive items such as automobiles is plunging as consumers retrench. Cars and light trucks sold in January at a 9.6 million annual rate, the lowest since June 1982, industry figures from Autodata Corp. showed. Sales plunged 55 percent at Chrysler LLC and sank 49 percent at General Motors Corp. as car loans became scarce after credit seized up late last year.
No Credit
“If you can’t get credit, you can’t sell vehicles,” Mark LaNeve, GM’s sales chief, said in an interview Feb. 3. “This is what is choking us to death.”
With overall demand cooling, imports of televisions, furniture and clothing, in addition to oil, have weakened. The trade gap probably narrowed in December to $36 billion, the lowest level since October 2002, the survey showed. Commerce will report the figures on Feb. 11.
While lower oil prices helped keep the import tab down, they also led to cheaper gasoline at the pump, providing the only bright spot to the gloomy backdrop.
A gauge of consumer sentiment this month fell to 61 from 61.2 at the end of January, according to economists surveyed before the Feb. 13 release by Reuters/University of Michigan. The measure reached a 28-year low in November.
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