Global business out­look drops to 5-year low

Financial Mirror (Cyprus) - - FRONT PAGE -

The world­wide econ­omy may not have re­turned to a re­ces­sion. How­ever, business ex­ec­u­tives around the world have started to ex­hibit so much anx­i­ety that another dip may be just around the cor­ner. The Markit Global Business Out­look dropped to a five-year low.

Five years ago, in 2009, much of the world re­mained in re­ces­sion, which makes the Markit data even more wor­ri­some. The fore­cast re­leased by Markit re­searchers showed: “The Markit Global Business Out­look Survey, which looks at ex­pec­ta­tions for the year ahead across 6,100 com­pa­nies, showed op­ti­mism fall­ing sharply in Oc­to­ber, drop­ping to the low­est seen since the survey be­gan five years ago. Hir­ing and in­vest­ment plans were also at or near post-cri­sis lows, price ex­pec­ta­tions de­te­ri­o­rated fur­ther.”

While Amer­ica cur­rently car­ries the world econ­omy on its back, mostly due to con­sumer ac­tiv­ity, busi­nesses do not share that sen­ti­ment: “How­ever, the most strik­ing de­vel­op­ment was the ex­tent of the down turn in the US, where op­ti­mism hit a new survey low, with the ser­vice sec­tor see­ing a par­tic­u­larly dra­matic de­cline.”

If Amer­i­can sen­ti­ment has fallen so sharply, U.S. fourthquar­ter gross do­mes­tic prod­uct, which many econ­o­mists fore­cast at 3% or 4%, will dis­ap­point.

Ar­eas where re­ces­sion con­tin­ues to hold economies in check were, as might be ex­pected, pock­ets of pes­simism: “Op­ti­mism in the US nev­er­the­less re­mained more buoy­ant than seen in the Eu­ro­zone and Ja­pan, the lat­ter suf­fer­ing from es­pe­cially weak con­fi­dence rel­a­tive to other ma­jor coun­tries as op­ti­mism slipped to the low­est for two years.”

No won­der cen­tral banks in both re­gions have be­gun more ag­gres­sive ef­forts to sal­vage their economies.

Also, the Chi­nese cen­tral bank has be­gun equally ag­gres­sive ef­forts at stim­u­la­tion, and to hold off what could be the start of de­fla­tion. Markit data tell why: “Con­fi­dence in China picked up slightly from the near-record lows seen in the sum­mer, though re­mained sub­dued com­pared to prior years.” Long term, ex­perts share the opin­ion that cen­tral banks have only mod­est (or less) ef­fects on eco­nomic down­turn. If so, the Markit data warn that the bal­ance of this year and next could be the start of a dip that looks like the early stages of a re­ces­sion.

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