Tags: global | economy

Economic Winter Here to Stay

By Hans Parisis
Wednesday, 24 Jun 2009 08:50 AM Current | Bio | Archive

A picture is sometimes worth more than a thousand words. If you would like to think the German industry is headed for a nice recovery on the grounds of the third consecutive increase in the IFO index, think twice.

Indeed, the index of German business climate for industry and trade again showed a timid but nevertheless continued rise three consecutive times. That said, we must admit the current IFO index remains firmly depressed at 85.9 but appears to have stopped dropping. It is not even close to a return to the 110-plus levels prevailing before the crisis.

All three German business climate indexes are still below where they stood 10 years ago. So, let’s look at the picture:

It is still way too early to know whether we are seeing the timid beginning of a genuine recovery of demand or only an inventory correction. If it is only the latter, it will not be sustainable.

The same situation is true for the United States and elsewhere.

To help the investor put everything in serious context, it is necessary to look at the list of the 15 leading economies’ GDP as the IMF calculated them for 2008.

Please keep in mind that world GDP stood at $60.6 trillion in 2008 and is contracting in 2009. Germany has still the world’s fourth economy and equals 25 percent of the size of the U.S. economy, 74 percent of China, 219 percent of Russia, 233 percent of Brazil, 303 percent of India, and 387 percent of South Korea.

Also, China’s economy represents 7 percent of the world economy. While still growing at 8 percent year-over-year when most of the big players are contracting, it is still wishful non-thinking to believe that China will pull the world out of this great recession.

We will have to do it all together and that will be very difficult to achieve. History has taught us that it never worked before.

Yes, Germany’s economy is very important and a trustworthy indicator of where the world economy could be heading in a sustainable way.

The bottom line is this: Spring time is over in the Northern hemisphere, and it seems we’re still stuck in the last days of winter.

© 2017 Newsmax. All rights reserved.

1Like our page
2Share
HansParisis
A picture is sometimes worth more than a thousand words. If you would like to think the German industry is headed for a nice recovery on the grounds of the third consecutive increase in the IFO index, think twice.Indeed, the index of German business climate for industry and...
global,economy
369
2009-50-24
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved