http://www.washingtonpost.com/wp-dyn/content/article/2009/01/23/AR2009012304172.html
Downturn Accelerates As It Circles The Globe
Economies Worse Off Than Predicted Just Weeks Ago
By Anthony Faiola
Washington Post Staff Writer
Saturday, January 24, 2009; A01
The world economy is deteriorating more quickly than leading economists
predicted only weeks ago, with Britain yesterday becoming the latest
nation to surprise analysts with the depth of its economic pain.
Britain posted its worst quarterly contraction since 1980 on the heels
of sharper than expected slowdowns reported from Germany to China to
South Korea. The grim data, analysts said, underscores how the burst of
the biggest credit bubble in history is seeping into the real economies
around the world, silencing construction cranes, bankrupting businesses
and throwing millions of people out of work.
"In just the past few days, we've had a big downward revision, we're
seeing that an even bigger deceleration is on the way than we thought,"
said Simon Johnson, former chief economist at the International Monetary
Fund and a senior fellow at the Peterson Institute for International
Economics.
The depth of the troubles, analysts say, indicates that nations may need
to spend more than the billions of dollars already planned on stimulus
packages to jump-start their economies, and that a global recovery could
take longer, perhaps pushing into 2010.
Analysts are particularly concerned about the slowdown in China and the
recession in Europe. There is mounting concern about the stability of
the euro and the British pound, which dropped to a 24-year low against
the dollar yesterday. Analysts are fretting about the possibility of a
debt default in a euro-zone country that could send fresh shock waves
through global financial markets.
The problems in Europe now appear to be as bad if not worse than those
in the United States. In the last quarter of 2008, the British economy
shrank at an annualized rate of 6 percent. That is worse than economists
expected, but also showed the British recession may be even harsher than
the one in the United States, where analysts predict data expected next
week will show the U.S. economy to have contracted between 5 and 5.5
percent in the last quarter of 2008.
The meltdown is altering high streets in Britain, where retail icon
Woolworths shuttered the last of its 807 branches this month after 99
years in business. Marks & Spencer, sometimes described as the
bellwether of Britain's retail sector, said this month that it would
close 27 stores and cut more than 1,000 jobs. The average price of a
house has plummeted to mid-2004 levels, according to Halifax, Britain's
biggest mortgage lender. Car sales are at a 12-year low. The number of
people out of work has climbed to nearly 2 million, a level not seen
since 1997 when the Labor Party came to power.
In fact, the only sector to show growth in Britain was agriculture,
which accounts for about 1 percent of the overall economy.
"The question now is not how bad will 2009 be, but will we recover in
2010 and if we recover, will it only be anemic?" said Andrew Scott,
professor of economics at the London Business School, adding that the
housing bubble is bigger, consumer debt is higher and the speed of the
slowdown faster than in previous recessions.
Partial data released in recent days by Germany, Europe's single biggest
economy, indicates its economy saw a major contraction in the last
months of 2008, posting a 6 percent annualized drop, according to Howard
Archer, chief Britain and European economist for IHS Global Insight in
London.
That could get worse as problems mount in the European financial system.
In recent days, major banks in Europe -- including the Royal Bank of
Scotland -- reported surprisingly massive losses. European authorities
are seen by some critics as falling behind the Americans in dealing with
distress in the their financial sectors.
Standard & Poor's has downgraded Greek and Spanish bonds and warned that
others, including Ireland's, may be next. The sense that some European
countries are now more risky has driven up the borrowing costs for even
large nations in the region, including Italy. That has made it harder
for those countries to raise the vast sums needed to launch major
stimulus packages aimed at economic recoveries.
Also troubling are signs that China, once a rare light in the global
economy, may not prove to be the pillar of strength in Asia that many
analysts had hoped. Beijing announced this week that its economy grew by
6.8 percent in the fourth quarter of 2008 -- slower than the 7 percent
analysts expected -- bringing total growth for 2008 to a seven-year low.
Chinese data, however, are somewhat opaque, and analysts warned the
slowdown there may be sharper than Beijing is willing to admit.
That is diminishing hopes for China as Asia's economic white knight,
with its growth potentially propping up economies in the region. And as
China grows at a far slower rate, it is importing fewer goods from
neighbors, giving export-dependent nations in the region no way to pick
up the slack from plummeting demand in the United States and Europe.
Particularly hard hit is South Korea, which saw trade with China soar in
recent years. But as China slows, and the United States, Europe and
Japan sink into deep recessions, unsold goods are piling up at South
Korea docks. This week, the government said the economy in the fourth
quarter staged its sharpest drop since the Asian economic crisis swept
across the country in 1998.
Special correspondent Karla Adam in London contributed to this report.
_______________________________________________
pen-l mailing list
[email protected]
https://lists.csuchico.edu/mailman/listinfo/pen-l
