Global Business Voice – IS THE GLOBAL RECESSION LATE?

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THE AGN GLOBAL BUSINESS VOICE SURVEY

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IS THE GLOBAL RECESSION LATE?

In June 2019, the economic expansion of the US will reach its tenth anniversary and the longest period of sustained economic growth on record. It looks set to continue, and it’s not just a US phenomenon. Commentators have been saying for some time that the global economy is due a significant “adjustment”….but it’s late. Where is it? Across the major economies, we can see bullish share valuations and increasing profits.

It’s not as if politicians are making life easy – Brexit and US/China trade wars must be having a dampening effect – and it’s likely that the impact of fiscal (quantitative easing) stimulus must be wearing off. If we are on the cusp of an economic downturn, surely its time, our clients were making preparations.

UBS recently conducted a study that revealed the telling economic conditions that presided in the four quarters before and the two quarters after an economic peak turned into a decline. The questions that follow are designed to gauge your perceptions; how much these factors play in your markets.

Consumer Confidence

Consumer confidence is a measure of confidence in the overall state of the economy. It impacts peoples (business and consumer) economic decisions – e.g. their spending activity. As a result, consumer confidence is a key indicator of the overall shape of the economy.

Q1 – Over the last 12 months would you say that consumer confidence*

Low – Has crashed to a low point

Below average – Has weakened

Medium – Has remained the same

Above average – Has increased

High – Has reached a new peak

Declining productivity

Productivity measures an economy’s efficiency in using labour to produce output. Any increase in productivity can suggest that the economy is producing more output with equal or less input. Increasing productivity points to a boom, declining productivity points to stagnation and recession.

Q2 – Over the last 12 months would you say that productivity in your country*

Low – Has crashed to a low point

Below average – Has weakened

Medium – Has remained good and steady

Above average – Has increased

High – Has reached a new peak

Flat housing Market

In many economies, there are strong relationships between the domestic housing market and the overall health of the economy. For example, the housing market represents about 15 per cent to 18 per cent of US GDP. A weak or strong housing market can have a substantial influence on the direction of the overall economy.

Q3 – Over the last 12 months what has happened to your domestic residential and commercial property market?*

Low – It is at rock bottom with no immediate sign of prices growth

Below average – Prices and activity have been declining

Medium – The property market is flat but clam right now

Above average – The property market is rising

High – Property prices and property activity is extremely buoyant

Declining auto sales

Auto sales are another “Bell weather” for the state of a domestic economy. In 2010 car sales ‘fell off a cliff’ as the financial crisis unfolded and have been in recovery for some time, but are there signs of a weakening position?

Q4 – Declining auto sales*

Low – Auto sales have plummeted and industry is struggling

Below average – The growth of recent years is fading

Medium – The market is flat and on a tipping point

Above average – There is modest growth in auto sales

High – Care sales growth is at a high and looks set to continue

Government intervention

During the financial crisis, many governments sought to kick start economic growth through various strategies. These ranged from interest rate cuts to cash injections to the banking system, from public spending on infrastructure projects to emergency tax cut, or a mix of all of the above. Many of these initiatives were implemented between 2009 to 2015, and it’s possible their effects are fading…or could be holding back a recession!

Q5 – Do you think your governments policies to counter the effects of the global financial crisis are still making an impact?*

They were largely ineffective and made no difference

Have made some impact but their affect is fading fast

Our economy no longer feels the benefits and can stand on its own

They are still playing role (if minor) in holding up your country’s economic growth

They are pivotal to the continued success of your country’s domestic economy

Your comments*

If you have any further observations, please share here:

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Yield curve and other investment indicators?

Typically, a ‘yield curve’ illustrates trends over time of bond investment market performance. The curve changes shape as the economic situation evolves. Stock market growth and investment returns and central bank interest rate trends are also pointers to whether a recession is imminent.

Q6 – What is happening to the general economic indicators in your country?*

They have sunk to a low

They are trending downwards

They have remained stable

They are trending upwards

They are at a high

All of these factors combined can paint a broad picture of the current state of an economy’s prospects. Review of the results (across a range of countries and continents) could shed some light on whether the predicted global economic cycle is unlikely to show up – practically upon us – or merely late in arriving.