Stock markets across the world plummet on Monday, 21 Jan 08, on worries of a global recession. It is the biggest single day decline since the Sept 11 attack.
A credit squeeze prompted by a crisis in the US subprime, or high-risk, mortgage sector has given way to a wider malaise in the world's biggest economy, with unemployment rising and the dollar falling.
All over the world, especially the developed nations, are suffering from the slowdown in the US. As said by Chairman of Eurogroup Finance Ministers, Jean-Claude Juncker, "The situation is continuing to deteriorate in the United States. In recent months, we have always ruled out a recession in the United States, but we cannot totally rule it out today".
US President announced on Friday, 18 Jan 08, of a US$140 billion stimulus plan, but this is seen as a little too little, a little too late. Najeeb Jarhom, head of research for retail clients at Fraser Securities in Singapore shared, "It looks like the US is heading for a recession or may be already in recession, looking at the data".
(source : http://news.yahoo.com/s/afp/20080121/bs_afp/stocksworld_080121214357)
The U.S. has suffered recessions only twice in the past quarter century, and both were short and mild. But there are good reasons to fear that the looming recession, if it arrives, could be worse.
The combination of heavy debt loads, still-high energy and food prices and a weakening job market has households tightening their belts.
That sets the stage for something more severe than the 2001 recession, which spanned just eight months. The eight-month recession that ended in early 1991, when a housing downturn and credit problems sapped the economy, is a better guide
University of Maryland economist Carmen Reinhart and Harvard University economist Kenneth Rogoff agree. They say the current crisis appears on track to be at least as bad as the five most catastrophic financial crises to hit industrialized countries since World War II.
(source : http://online.wsj.com/article/SB120086867005203883.html?mod=hpp_us_whats_news)
Every major banks in America has suffered major losses from bad loans. Any consumer loans made out are subjected to exceptional risk of default. This range from housing mortgage, auto mobile loan, credit cards, renovation loan, unsecured loan, you name it, you have it.
Living in denial and oblivious to the on-going just makes matters worst. Early signs of trouble dated as far back as in 2006 but had slipped the eyes of most people including economist.
Somehow, this is like SARS (Severe Acute Respiratory Syndrome). Warning signs of a new strain of flu bug that are immune to then current drugs were there but people ignored it, till it struck and killed many.
As a matter of fact, signs of the US recession had been prominent since months ago. I had mentioned of some recession or even a potential depression, in my post couple of months ago. I won’t even be surprise to know that the US is already in recession.
Since the Sub-prime meltdown followed by credit crunch, signs had point the US economy towards a recession. Interest rate slashes started in September 07, job creation started to decline since November 07, manufacturing dipped since December 07, and the list goes on.
Government can’t announce a recession as it happen, they have to keep it contained for awhile till they can’t wrap it anymore. Once a recession is announced, consumer confidence plunge, and will worsen the current situation.
On a positive note, the likely US recession will not likely hit most economies as badly as it would have been if this had happened 10 years ago. In the last few years, many countries have lesser dependence on the US. With booming economies in China and Asia, countries have spread its trading partners to many countries.
In the US itself, many other industries (apart from housing and credit) are still performing. This may help reduce the potential fallout.
Wednesday, January 23, 2008
Friday, January 18, 2008
Survey Shows Asia Can Expect Highest Salary Increase This Year
Survey company ECA International's (world's largest membership organisation for human resources) Salary Trends Survey 2007-2008 found out that workers in Asia can expect the highest salary increases this year.
The results have indicated that Singapore workers could expect salary increases of 5 percent (considered high for a developed economy). ECA International's General Manager Mr Lee Quane said the current fears of a recession in the US would not dampen salary increase projections here.
Due to high staff turnover, companies may have to pay higher than the average increase (5%) to retain key staff.
(source : http://www.channelnewsasia.com/stories/singaporelocalnews/view/323172/1/.html)
As mentioned by Robert Kiosaki in his book, as people earn more, they becomes poorer. With higher pay, people ends up spending more, changing car, changing house, changing lifestyle, etc. This results in larger liability instead of increasing the asset column.
Rather than indulging in better lifestyle and increasing liability, one could ask himself how to they could increase their asset column instead. By investing extra income, we could have grown our asset column and have more to spend later. It pays to delay gratification.
The results have indicated that Singapore workers could expect salary increases of 5 percent (considered high for a developed economy). ECA International's General Manager Mr Lee Quane said the current fears of a recession in the US would not dampen salary increase projections here.
Due to high staff turnover, companies may have to pay higher than the average increase (5%) to retain key staff.
(source : http://www.channelnewsasia.com/stories/singaporelocalnews/view/323172/1/.html)
As mentioned by Robert Kiosaki in his book, as people earn more, they becomes poorer. With higher pay, people ends up spending more, changing car, changing house, changing lifestyle, etc. This results in larger liability instead of increasing the asset column.
Rather than indulging in better lifestyle and increasing liability, one could ask himself how to they could increase their asset column instead. By investing extra income, we could have grown our asset column and have more to spend later. It pays to delay gratification.
Monday, January 14, 2008
The World Economy
China
It was reported that China's global trade surplus had surged 48% in 2007. This is China's fastest growth in a decade.
The growth is at risk of a slowdown as world's economy weaken and U.S nearing recession. China's exports are now playing a bigger role in China's traditionally investment-driven economy, and thus the country has more to lose than it once would have from a global economic slowdown.
(source : http://online.wsj.com/article/SB120003317754883551.html?mod=todays_asia_nonsub_economy_and_politics)
United States
On the other continent, the U.S consumer confidence fell to an all-time low as worries about jobs, energy bills and home foreclosures darkened people's feelings about the country's economic health and their own financial well-being.
Consumer confidence is now at a low of 56.3 against this time last year, at 95.3, out of a scale of 100.
Confidence are affected by the following (not limiting):
1) Job openings had declined since November. Unemployment rate is currently standing at about 5 percent.
2) The meltdown in the housing market has dragged down home values and made people feel less wealthy.
3) Harder-to-get credit has made it difficult for some to make big-ticket purchases.
4) High energy prices are squeezing wallets and pocketbooks.
5) There has been much hand-wringing on Wall Street and Main Street as to whether all these problems will plunge the country into recession.
The White House (U.S) is exploring rescue plans including tax cut while Fed Reserve Chairman Ben Bernanke pledged last week to continue lowering interest rates.
(source : http://www.kiplinger.com/apnews/XmlStoryResult.php?storyid=526835)
Let’s hope the sufficient actions will be taken to reduce the fallout.
It was reported that China's global trade surplus had surged 48% in 2007. This is China's fastest growth in a decade.
The growth is at risk of a slowdown as world's economy weaken and U.S nearing recession. China's exports are now playing a bigger role in China's traditionally investment-driven economy, and thus the country has more to lose than it once would have from a global economic slowdown.
(source : http://online.wsj.com/article/SB120003317754883551.html?mod=todays_asia_nonsub_economy_and_politics)
United States
On the other continent, the U.S consumer confidence fell to an all-time low as worries about jobs, energy bills and home foreclosures darkened people's feelings about the country's economic health and their own financial well-being.
Consumer confidence is now at a low of 56.3 against this time last year, at 95.3, out of a scale of 100.
Confidence are affected by the following (not limiting):
1) Job openings had declined since November. Unemployment rate is currently standing at about 5 percent.
2) The meltdown in the housing market has dragged down home values and made people feel less wealthy.
3) Harder-to-get credit has made it difficult for some to make big-ticket purchases.
4) High energy prices are squeezing wallets and pocketbooks.
5) There has been much hand-wringing on Wall Street and Main Street as to whether all these problems will plunge the country into recession.
The White House (U.S) is exploring rescue plans including tax cut while Fed Reserve Chairman Ben Bernanke pledged last week to continue lowering interest rates.
(source : http://www.kiplinger.com/apnews/XmlStoryResult.php?storyid=526835)
Let’s hope the sufficient actions will be taken to reduce the fallout.
Thursday, January 3, 2008
Singapore Economy Growth
What a sombre way to greet 2008.
Singapore's Economy
According to economic reports, Singapore's economy grew by 6% (pulled down by falling manufacturing output) in the fourth quarter of 2007 instead of Economist projection of 7.0-8.5%. Overall GDP for 2007 grew by 7.5% in 2007 while growth for 2006 was 7.9%. Growth for 2008 is also projected lower at 4.5 - 6.5% for this year. (Source : http://news.sg.msn.com/article.aspx?cp-documentid=1170943)
United States' Economy
The US manufacturing has also contracted in December after 10 continous months of growth, sinking to its lowest point in 5 years. The decline suggested that the overall (US) economy may be weakening faster than most economist predicted.
Refering to my previous post, the few signs of looming recession includes:
- falling job rate
- falling manufacturing output
- housing downturn
- falling interest rates, etc.
Slowdown in manufacturing can translate to job cut, in turn, lesser consumer spending, causing more slowdown in the economy.
Nomura chief economist David Resler said December results can sometimes be skewed by seasonal variation in orders, so January will be very closely watched to see whether the sector will keep falling.
"I think the troubling thing is not just that it was so low, and it is at a level that is typically breached only in recession, but that it's continuing in a downward trend," Resler said, noting that the index has been dropping since June.
(Source : http://biz.yahoo.com/ap/080102/economy_manufacturing.html)
Let's hope US economy doesn't face another month of slowdown.
China's Economy
China's economy on the other hand faces double digit growth sine 1978. China has overtaken the US in global GDP growth. This can be a cause for concern. The biggest worry is that the economy is overheating and inflation surging out of control.
The Chinese Government had to freeze government controlled prices such as oil, electricity and water, to curb inflation a little.
(source : http://www.economist.com/finance/displaystory.cfm?story_id=9861591)
What Next
Even though US is no longer the largest contributor to global GDP, it is still the No 1 economy in the world. Any setback in US will have some impact to global economy. Afterall, US is still the No 2 trading partner to Singapore (Export - 10.2%. Import - 12.7%).
(source : https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html#Econ)
Any sneeze in the US economy will have some direct impact to us. Signs have shown since more than half a year ago, that the US economy is heading for trouble (credit crunch) but yet, people here are spending unnecessarily on unrealistic commodity (eg. changing car every 3 years or lesser). Isn't it more sensible to plough our funds to proper investment that can survive time and upsets, yet giving us more to spend in the future?
Singapore's Economy
According to economic reports, Singapore's economy grew by 6% (pulled down by falling manufacturing output) in the fourth quarter of 2007 instead of Economist projection of 7.0-8.5%. Overall GDP for 2007 grew by 7.5% in 2007 while growth for 2006 was 7.9%. Growth for 2008 is also projected lower at 4.5 - 6.5% for this year. (Source : http://news.sg.msn.com/article.aspx?cp-documentid=1170943)
United States' Economy
The US manufacturing has also contracted in December after 10 continous months of growth, sinking to its lowest point in 5 years. The decline suggested that the overall (US) economy may be weakening faster than most economist predicted.
Refering to my previous post, the few signs of looming recession includes:
- falling job rate
- falling manufacturing output
- housing downturn
- falling interest rates, etc.
Slowdown in manufacturing can translate to job cut, in turn, lesser consumer spending, causing more slowdown in the economy.
Nomura chief economist David Resler said December results can sometimes be skewed by seasonal variation in orders, so January will be very closely watched to see whether the sector will keep falling.
"I think the troubling thing is not just that it was so low, and it is at a level that is typically breached only in recession, but that it's continuing in a downward trend," Resler said, noting that the index has been dropping since June.
(Source : http://biz.yahoo.com/ap/080102/economy_manufacturing.html)
Let's hope US economy doesn't face another month of slowdown.
China's Economy
China's economy on the other hand faces double digit growth sine 1978. China has overtaken the US in global GDP growth. This can be a cause for concern. The biggest worry is that the economy is overheating and inflation surging out of control.
The Chinese Government had to freeze government controlled prices such as oil, electricity and water, to curb inflation a little.
(source : http://www.economist.com/finance/displaystory.cfm?story_id=9861591)
What Next
Even though US is no longer the largest contributor to global GDP, it is still the No 1 economy in the world. Any setback in US will have some impact to global economy. Afterall, US is still the No 2 trading partner to Singapore (Export - 10.2%. Import - 12.7%).
(source : https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html#Econ)
Any sneeze in the US economy will have some direct impact to us. Signs have shown since more than half a year ago, that the US economy is heading for trouble (credit crunch) but yet, people here are spending unnecessarily on unrealistic commodity (eg. changing car every 3 years or lesser). Isn't it more sensible to plough our funds to proper investment that can survive time and upsets, yet giving us more to spend in the future?
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