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Japan, Singapore already in recession? Spain, UK rest of Europe next?

Posted by Adrian on January 29, 2008

The global recession could already be in the works, with main global economies such as Japan, Singapore, UK and Spain either close to recession or in recession.

According to a recent Bloomberg article, it is suggested that Singapore could already be in a recession. Since the banking sector is a traditional indicator too the health of the Singapore economy, banking stocks have edging lower, with the overall Straits Times Index dropping sharply from it’s high on the January 9th 2008 of 3,359.42 points.

refer to chart:

_sti.png

from Bloomberg article,

” Singapore may already be in a recession. Its economy contracted for the first time in 4 1/2 years in the fourth quarter as factory output slowed and electronics exports dropped. The cooling local real estate market worsened the slowdown for financial services firms.”

After years of a deflationary economy, Japan is now faced with a stagflation style economy, wages, productivity and consumer spending is lower, yet prices are rising for food such as what based products. Also the obligatory higher oil costs, which is also a global concern too, have risen significantly in Japan.

From Bloomberg article:

“Other businesses are trying to bear cost increases themselves instead of jeopardizing their market share. Aeon Co. and Seven & I Holdings Co., Japan’s two biggest retailers, announced price reductions on some products last year. Earlier this month, Izumiya Co., an Osaka-based supermarket chain, cut prices on 100 items ranging from cheese to detergent.

“Consumers are hopping around stores to find bargains,” said Katsutoshi Shimokawa, an Izumiya spokesman. “Foisting higher costs onto them would only discourage consumption because wages haven’t risen.”

Europe needs to watched closely, amidst the recent Societe Generale rogue trader losses of 4.9 billion euros – the whole EU is under strain by the credit, and liquidity crisis stemmed from the US sub prime market collapse. Northern Rock was prime example to the seriousness of a financial sector unable to finance it’s self, hence it needed bailouts by the central banks. In Northern Rocks case, the Bank of England pulled Northern Rock out of insolvency. Whether all not the Federal Reserve officials, politicians, some economists believe the US can be saved from a recession (call it denial if you will) – it won’t matter, as the US is already in one. Europe appears to be sliding into a collective recession, from the UK, Italy (possible depression), Spain and Germany. Are bellwether indicators for a recession Spain and the UK? Both countries had massive property booms, heavily leveraged businesses, indebted consumers – overall extremely inflated economies, vulnerable to any credit tightening, or contracting.

regarding Spain, from Bloomberg:

“Spain is also grappling with a housing boom gone bust. Banco Bilbao Vizcaya Argentaria SA, Spain’s No. 2 lender, predicts property prices will fall this year and building permits will drop 25 percent.

With more than 18 percent of gross domestic product coming from construction, Spain’s economy is particularly susceptible to weakness in real estate.

Spanish Construction “The main problem lies in construction but it has already spread to other sectors,” says Gilles Moec, senior economist at Bank of America in London.”

regarding UK, from Bloomberg,

`Gloomy Picture’

“It’s a gloomy picture for the consumer,” says James Knightley, an economist at ING Financial Markets in London. “The prospect of recession is becoming more realistic.”

Retailers Tesco Plc and Marks & Spencer Plc this month called for interest-rate cuts to help consumers, who have 1.4 trillion pounds ($2.76 trillion) of debt. Economists surveyed by Bloomberg predict the Bank of England will lower its main rate a quarter percentage point, to 5.25 percent, on Feb. 7.”

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2 Responses to “Japan, Singapore already in recession? Spain, UK rest of Europe next?”

  1. […] Japan, Singapore already in recession? Spain, UK rest of Europe next? […]

  2. Debt said

    Hope not from the UK

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