The worst is now over: Hope springs eternal? Optimism? Wishful thinking or a reality?
Jean-Claude Trichet, the president of the European Central Bank, has said there was a "slowing down in the decrease in GDP", while certain countries are already reporting a pick-up in the GDP rate. "We are, as far as growth is concerned, around the inflection point in the cycle," he added. Do such evaluaions and date show that the worst is now over (?!) ie that the lowest point has been reached and now the bounceback is starting? Social, as opposed to natural, sciences have the peculiar characteristic that if enough people believe that something is "true", then it becomes true, because their resulting actions make it true (even if it was not true in the firstplace). Plus influential opinions tend to "market make".
It is amazing to read "analyses" or reports that claim that the fact that some figure or stat rose more "than expected" or fell less "than expected", that is cause for optimism.
The OECD (Organisation for Economic Cooperation and Development) has cliamed that there are "tentative signs of, at least, a pause in the economic slowdown" in the UK, France, Italy and China. These "signs" are based on the OECD's "composite leading indicators index" (CLI), which tracks forward-looking economic data.
Plus, US consumer confidence has recovered from it extreme lows in the last few weeks.But is that enough to proclaim that the bottom has been reached and that recovery is around the corner? Or the less than expected or previous months rise in US unemployment?
It seems that the recent rally in stock markets around the world has prompted hopes that the world economy is recovering (and that the worst is now over (but is it?)), thus investors are betting that demand for oil will recover soon, leading to oil prices rise to the highest level in six months (around USD 60 per barrel) in spite so far scant evidence that demand for oil is recovering.
The US trade deficit widened in March for the first time since July 2008, as sales of exports fell amid the recession.
UK manufacturing output continued to fall, but the fall was not as severe as had been expected (and that is supposed to create optimism??). In Q1/09, UK unemployment went up by 244,000 to 2.22 million to 7.1% of the workforce.
According to April figures in China, industrial output showed slower growth than before, "only"7.3%, while retail sales rose!
PS. Let's assume that the worst is now past and that recovery is around the corner. Let us then recall the crisis before the current (subprime led/caused/rooted) global crisis, that of less than 1 year ago, which was driven by the USD 120++ per barrel global prices of oil and many "staple" foods. Then came the subprime tsunami and a new crisis. Any lessons there?
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