From cheers to fears – who would want to rule the world?
11 May 2009
Not so long ago, economies were booming, house prices were strong, and ‘recession’ was a word we hadn’t heard since the ’80s.
In these pandemic-fuelled, credit-crunching times of anxiety, everyone is looking to point the finger of blame (as long as it has been thoroughly cleaned and sanitised).
Prime Minister Gordon Brown has said that the UK is well prepared for further cases of swine flu as he urged anyone displaying symptoms to seek advice as quickly as possible.
“We know that this is happening around the world and we know also that we have preparations in place so that people can get the Tamiflu antiviral drug and can be treated if they get the disease,” said the PM.
The World Health Organisation has raised the pandemic alert to Phase 5 as the government commenced a campaign to advise people how to avoid spreading germs that can cause colds and flu.
On this subject, President Barack Obama said: “In the 21st century, disease flows freely across borders and oceans, and, in recent days, the 2009 H1N1 virus has reminded us of the urgent need for action. We cannot wall ourselves off from the world and hope for the best, nor ignore the public health challenges beyond our borders. An outbreak in Indonesia can reach Indiana within days, and public health crises abroad can cause widespread suffering, conflict, and economic contraction. That is why I am asking Congress to approve my Fiscal Year 2010 Budget request of $8.6 billion – and $63 billion over six years – to shape a new, comprehensive global health strategy. We cannot simply confront individual preventable illnesses in isolation. The world is interconnected, and that demands an integrated approach to global health.”
The first 100 days of Obama’s presidency have certainly been eventful, and swine flu is just one of many issues. Obama inherited unemployment rates of 7.6% in January (up 2.7% from December 2007 levels), and GDP, which had edged up slightly on average during the first three-quarters of 2008, dropped at a sharp 6.3% annual rate in Q4 of 2008. Industrial production, which had fallen at a 4.3% annual rate during the first eight months of 2008, deteriorated much more swiftly at an 18.3% annual rate during the five months from August to January. Sales of motor vehicles, which had averaged 14.3 million units at an annual rate during the first eight months of 2008, dropped off sharply to 10.3 million units at an annual rate in Q4 of 2008; the lowest quarterly rate since 1982 (Worst year since 1980 for US automobile sales). Sales dropped further, to 9.5 million units in January. Motor vehicle production was cut to the lowest level since at least 1967, and Chrysler and GM requested Federal government help to stay in business. If the cars are not selling, manufacturers do not need an abundant supply of parts.
Research firm Strategy Analytics have stated that the auto electronics market will take until 2011 to recover. The global banking crisis and subsequent recessions in many major markets has resulted in a crash in vehicle production and sales. This has led Strategy Analytics to forecast a 15% fall in the value of automotive electronics systems installed in light vehicles in 2009, down to $126 billion; which follows the 3% fall in 2008.
With car sales diminishing (new car registrations in the UK fell 24% in April and the market has fallen by 28.5% over the first four months of 2009), scrappage schemes have been established that follow a successful German model. This means a £2000 incentive (half from government and half from industry) to scrap a car registered on or before 31 August 1999 when buying a new vehicle. The scheme is not due to start until 18 May, which could cause some hold-off in demand until then.
To further boost the UK economy, the Bank of England’s Monetary Policy Committee has voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to continue with its programme of asset purchases financed by the issuance of central bank reserves and to increase its size by £50 billion to a total of £125 billion. Whilst the world economy remains in deep recession, output has continued to contract and international trade has fallen precipitously. The global banking and financial system remains fragile despite further significant intervention by the authorities. In the UK, GDP fell sharply in the first quarter of 2009. But surveys at home and abroad apparently show promising signs that the pace of decline has begun to moderate.
So perhaps we’ve got through the worst and the world economy will react positively and grow as hoped. There is speculation that swine flu will play a part in extending the recession since movements in Mexico have been restricted or suspended, and as such, trade with the country is limited. But as long as investors are looking at new markets (Polish set to clean up), and money is there to support the industry, it will prosper.
What are your thoughts on the subjects mentioned in this comment? Send an email to let me know.
This week’s leader was written by Paul Wolfe, EMTww’s Assistant Editor
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