It's the economy stupid
I'm not sure I share the Prime Ministers optimism that Summer will fix the economy, I think the we are experiencing the same false dawns the global economy experienced between 1929 and 1935. Hoover would contend that 'prosperity was just around the corner' in the same way our Optimist Prime does now.
Jenni McManus gets grim...
Fantasy economy exposed
NZIER has seen no recent data to contradict the grim view taken by its economists in last month's Quarterly Survey of Business Opinion. This described a simultaneous slowdown across all economic sectors and regions midway through this year, alongside plunging business confidence. Seasonally adjusted, a net 9 per cent of firms are pessimistic compared with a net 26 per cent of optimists in the June survey.
"The economy contracted in the September 2010 quarter," NZIER said. "Business profitability is deteriorating; this may weigh on investment and hiring, which are drivers of medium term growth."
The problems are self-perpetuating. Unemployment depresses consumer spending which, in turn, discourages hiring and capital investment, which depresses consumer spending.
Last month NZIER estimated each New Zealander was now spending $45 a week less than during the past decade – or about $10 billion a year. Retailers and the residential property market have been the key losers. Latest figures from Barfoot & Thompson and Quotable Value show Auckland house-sale volumes are 35 per cent down for the year while prices across New Zealand are down 5.5 per cent from their peak in late 2007. Retail sales, like GDP growth, have averaged less than 0.5 per cent per quarter.
In its July business opinion survey – and long before Reserve Bank governor Alan Bollard's significant change of view (downwards) on the strength of our economic recovery – NZIER's principal economist Shamubeel Eaqub warned that small businesses were leading the decline in confidence. "That's a big warning sign," he said. "They tend to be the canaries in the coalmine. There are signs the recovery may be stalling."
This was evident even before the Reserve Bank started raising interest rates in June. "A year into the recovery, you would expect the economy to be going really strongly by now."
Mr Eaqub says the weakness in house sales in the past nine months is a good indication of the overall level of demand in the economy. Business lending has contracted by 7.5 per cent year on year in recent months and firms are not hiring or investing.
Any recovery in the export sector is "very narrow", he says. About half the activity involves three commodities (dairy, forestry and oil) to two destinations (Australia and China).
...could it be that things are not really going to get better? Even in her pessimistic piece, Jenni still feels compelled to claim the worst is over, almost pleadingly. The commentators are cheerleading a game no longer responding to their rules, a crises of capitalism will do that.
German deceleration prompts double dip fears for eurozone
The economic recovery of the 16-nation eurozone stuttered in the third quarter of the year, official data published yesterday revealed, with even the strongest countries in the region warning of lower than expected growth. Overall, the eurozone economy grew by 0.4 per cent between July and September, compared to the 1 per cent of growth achieved between April and June.
Even Germany, which has so far been the powerhouse of the recovery, saw growth rates slip markedly. Its GDP grew by 0.7 per cent, well down on the record rate of 2.3 per cent recorded during the second quarter of the year.
France's third-quarter growth was 0.4 per cent, down from 0.7 per cent in the last quarter, while Italy posted 0.2 per cent, down from 0.5 per cent.
In Greece, which continues to be the worst performing member of the eurozone, recession continues. Its economy shrank by 1.1 per cent over the third quarter, though this was a marginally better performance than the second quarter's 1.7 per cent fall.
...or will the first to topple be Ireland?
Even a bail-out can’t mask Ireland’s fundamental woes
Yeah I don't think we are through this recession at all. If Christmas is as dreadful to retail as it could be in NZ this year, we could have the next vast wave of lay offs early next year in retail.
This meltdown will continue right when public services and welfare are being cut. As the poor are asked to do with less because greedy corrupt Wall st. corporates pyramid-scheme-crashed the global economy, there will be a rising anger and that anger will be ripe for political expression