Source : The Business Times, October 18, 2007
(WASHINGTON) Leading Wall Street chief executives predicted a 37 per cent chance of a US economic recession in the next 12 months, according to a Financial Services Forum survey released yesterday.
The forum is a policy group made up of the chief executives of 20 of the world's largest financial institutions, including Citigroup Inc, Morgan Stanley, Goldman Sachs and MetLife.
The executives said they expect slower US economic growth over the next year due to the housing slowdown, credit market turmoil and higher energy prices, according to the survey.
In predicting a 37 per cent chance of a US recession in the coming 12 months, the executives also cut their expectations of economic growth.
The forum's US economic growth index fell from 2.03 in April, when the last bi-annual survey was taken, to 1.27 in October. The growth survey represents sentiment on a scale ranging from -5 for strongly negative growth to 0 being no growth and 5 being robust growth.
Former Federal Reserve chairman Alan Greenspan this month put the odds of a recession at less than 50 per cent. A Reuters survey of 56 private economists earlier this week found the majority saw the chance of a US recession at somewhere between 21 per cent and 30 per cent.
The Financial Services Forum executives also indicated that the credit market problems are not finished. On a scale of 1 to 5, with 5 being significant turmoil still to come, the chief executives on average answered 2.9, according to the survey.
The survey found the executives expect a Federal Reserve interest rate cut of 25 basis points before the end of the year.
In September, the Fed cut benchmark rates by a hefty half-percentage point to 4.75 per cent amid concerns about increasing mortgage delinquencies and financial market disarray.
In assessing the stock market, the executives predicted the Dow Jones Industrial Average (DJIA) would finish the year at 14,137, according to the survey. On Tuesday, the DJIA closed at 13,912.9. -- Reuters
With the world so intergrated, this is exactly the point many many advocates of the "China will save us (the rest of Asia) if the US falters" miss out on.
ReplyDeleteWho does China export to? The U.S. - so it is inevitable that a US slowdown will hit China's export.
Now, who does China import from?
The rest of Asia, Latam and resource rich countries like Australia ie it has a huge trade surplus with the US but on the other side of equation it has a huges trade deficit with most other countries.
One can argue that China's growing and affluent middle class will provide a cushion but let me tell you that at this point, its only the coastal cities that are affluent - and these cities are very much tied into the global economy.
Wealth has not spread to the rural areas until which, we will only see real domestic demand support China's growth.
As it stand, the China story remains very much an export-driven growth one.
China's trade deficit with East Asia hits $87.5b
(Xinhua)
Updated: 2007-07-15 09:45
Although China has an overall foreign trade surplus, it had a deficit of $87.5 billion in 2006 with East Asian countries, said Liao Xiaoqi, vice minister of commerce, on Saturday.
Liao said at the 3rd East Asia Investment Forum that economic and trade exchanges between China and East Asian countries have been growing very fast, with the combined trade volume reaching $502.4 billion in 2006, accounting for 32.5 percent of China's foreign trade for the year.
He said that China mainly imports raw materials and parts from East Asia, and exports the processed or assembled products to European and American markets.
China has become the largest export market for the Republic of Korea, the no. 2 export market for Japan, the no. 3 export market for Thailand, and the no. 4 export market for Indonesia, Singapore, the Philippines and Malaysia.
"China's development has brought about growth opportunities for East Asian countries," he said.
http://www.chinadaily.com.cn/bizchin...nt_5435197.htm
For Australia see
http://www.theage.com.au/news/Busine...067337787.html
For Latam see
http://www.mercopress.com/vernoticia...4&formato=HTML
Don't forget about the balancing act, when we talk about global economy.
ReplyDeleteWhen 1997 financial crisis hit Asia, US as part of the global economy also got impacted. But that was as far as their stock market, not property nor real economy.
And how long did US's stock market recover from the impact? Barely a month or two. Why? Because, the centre of the problem was in Asia and not US.
Moreover, as Asia being perceived much riskier and unfavor for investors, they then shifted their investment to the west, especially to US.
All wealthy ppl around the world acquired US assets. Which caused US enjoyed the longest ever economy growth in their history.
Meanwhile within the same period, countries in Asia was suffering its worst ever economy recession and trying to pick up from the pieces.
And now, after about a decade later (one economic cycle), the global economy need to have another rebalancing act again.
But this time is the other way around. The sub-prime is the US crisis and the bubble is US's.
Is Asia being impacted? Yes for stock markets, as it is part of the global financial market which is liquid and sensitive. No for property sector and real economy.
How fast does Asia's stock markets recover from the impact of US subprime crisis? I think the rally on the stock market for last two weeks have given us the answer.
Will the property market and real economy in Asia experience a lasting booming like US a decade ago?
You bet!