I guess this is most talk-about topic among us. I m sure for the white collar around the country ie the more educated ones are wondering whether they will be out of job when the financial turmoil finalist hit our shore. The next category of people that discuss this same issue will be a bunch of uncle – aunties ie retirees whom normally are usually free to only read the headlines of major news daily without in-dept understanding of the state of circumstances. Finally, we have a group of people, be it educated or not, rich or poor, smart of dumb who do not care less of the current status now. Well, let me guess, I hope I am wrong, first group consist of 10% , second, 10% and the third group make up the most of the Malaysian say 80%?
This question really stings me because as we are aware, Malaysians generally do not like to read. Go and check with the major book store they will show you the statistic of readership in Malaysia compare to Japan, Singapore or HK. The consequential question is do the general public in Malaysia equipped with a “wave-sensor” to detect the strong “under current” of financial tsunami started from the US that has slowly hitting our shore.
What even more worries me was the 80% category do not care to know more about the state of economy of Malaysia in addition to the 20% category MAY not obtain sufficient independent and reliable information for their consumption. There seems to be a double whammy effect. If you monitor local news reported on major news daily quoting our big-shots in field of politic and government agency (not to mention name here, otherwise this blog will be frozen under ISA) that Malaysian economy is slowing but is strong to withstand the strong under-current of financial tsunami. GDP growth of 3% is still achievable!! Well, well, I am not an economist, neither that I am expert in this field to comment whether what they said is truthful.
As a layman, we should, common sense will tell, verify their statements worth trusting. With proliferation internet, there are various useful sources of information on the net for your consumption. All you have to do is some minor effort to do some internet research. What’s more can you ask for while all information is free of charged?
Following are just snapshots article and readings I came across during the weekends that offer some independent source of information pertaining to the burning question above:
1. Asia’s economies are imploding fast
SYDNEY, Dec 13 — World trade, especially in Asia, continues to plummet, pushing China closer towards recession while Japan is now deeply depressed.
In China the falls are almost as staggering as the incredible growth the nation has seen in recent decades. While recession in developed nations is defined as negative growth in gross domestic product over a year — or a few quarters — in China, 5 per cent growth is……………..
2. Retail sales and prices fall again
WASHINGTON, Dec 13 — Signs that the US recession will be long and severe mounted with a fresh round of bad economic news, including plunging sales from manufacturers to stores and falling prices that raise fears of dangerous deflation.
The widening economic troubles did put a lid on inflation. But they raised concerns about the opposite threat — the potential for a bout of deflation that could drag down incomes, clobber home prices even more and shrink corporate profits.
3. China and India: Suddenly vulnerable
LONDON, Dec 13 — The speed with which clouds of economic gloom and even despair have gathered over the global economy has been startling everywhere. But the change has been especially sudden in the world’s two most populous countries: China and India.
Until quite recently, the world’s fastest-growing big economies both felt themselves largely immune from the contagion afflicting the rich world. Optimists even hoped that these huge emerging markets might provide the engines that could pull the world out of recession………………………..
4. CIMB ECONOMIC UPDATE
12 December 2008
Industrial Production
Oct 08: IPI flags a markedly slower 4Q08 GDP
AYSIAL603 2084 9667 – hengguie.lee@cimb.com
IPI contracts further in Oct. Malaysia’s index of industrial production contracted further by 3.1% yoy in October (-1.7% in Sep) for the second consecutive month. This was largely attributable to the fallout from external demand while domestic demand also softened. This came in slightly better than our estimates for a decline of 3.4% but worse than market consensus for a drop of 2.8%.
Contractions across the board. The manufacturing sector registered two straight months of decline in October (-2.5%) and -1.0% in September. The mining sector declined by 5.4% in October (-4.8% in Sep) while the electricity sector declined by 1.6% in (+0.1% in Sep). Industrial output should weaken
further in response to a worsening external environment as well as weak domestic conditions.
A poor start to 4Q08. Together with the contraction in exports and other forward indicators, the decline in October’s IPI signals a markedly slower growth in 4Q08. Hence, we expect the economy to downshift further to an estimated 3.0% in 4Q08 from 4.7% in 3Q and 7.1% in 1H08, taking the full year growth estimate to 5.6% this year. The biggest drag on growth is the manufacturing sector. With a
severely deteriorated trade picture and the outlook on the US economy weakening, we estimate 2009’s growth to ease sharply to between 2.5-2.7% in 1H09 before picking up moderately to 3.0-3.2% in 2H. This brings the full year growth estimate to 3.0% for 2009. We see a 30% of a technical recession in 1H09.
Comment by this Blogger:
From the first article, we know that the world trade is dwindling and plummeting fast in wake of the credit crunch furiously eroding the US economic health. Due to the erosion of the consumers’ and business community’s confidence sentiment in the US, technical recession was already wide talk-about in the US sometime 6 months ago. As the negative sentiment hitting the climax arising over bankruptcy news of among the largest investment banks, AIG, the big three auto companies, the fearful sentiment was looming the household in the US and the business community. Murky outlook coupled with the continuation of more bad news to come, how this circumstance could calm the market sentiment of the consumers. With the entire environment brace with gloom and doom news, the immediate response is to cut spending in order to conserve resources to face uncertainty in the coming months, hopefully not years.
The US being the largest market for consumers spending, consumer more then half of the goods and services produced in the world. As the consumption rates in the US continue to dwindle, importers in the US have started to reduce imports from all over the world. As the demand for their goods and services started to fall, the other part of the world in turn start to reduce import of various source of the raw materials and inputs. In summary, world trades are facing severe contraction to a level which has not seen before. A good barometer to judge the pace of world trade is by referring the Baltic Index which hits its five years low.
The condition could get worse, as evidenced by the Second article. Please observe, the price fall again, indicating the consumer sentiments are not seeing its bottom anytime soon yet.
The Third article is giving us an idea how the erosion of the US consumer confidence has impacted the most promising economy in the world currently. Couple of months back, China was deemed to be less affected the US financial tsunami cushion by its large and ever growing consumers market. But now, that assumption and prognosis no longer hold water. Its exports to the US has contracted seriously and the worst is yet to come, millions of the people will be out of jobs, take home income will erode, property bubble is major cosmopolitan will burst, crime rate will rise………………and so on.
Let come back to the local front, the US is one of the biggest trade partners of Malaysia. As this dirty partner playing around without taking precautions, has passed on the virus to us. Malaysia could continue to claim innocent and probably naïve with its leaders continue to “artificially optimistic” about the country’s economic outlook. Well, as mentioned before I am not an expert to advise you neither I am here to dispel the truthfulness of our local leaders’ optimism. I am only here to provide you additional independent information for your consumption. With that I end with the last line of the fourth article: “We see a 30% of a technical recession in 1H09”*.
* PS: this statement was arrived based on Oct 2008 statistic. Assuming the best scenario that Nov and Dec 2008 are able to maintain the number achieved in Oct 2008. The 30% probability will hold. What if the statistics in the last two months become worse? Could the probability become 50% or 70% or 100%? Well, whatever chances it is, get yourself prepared for worst to happen.
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